The British government has set out plans to make the UK a global crypto-asset technology hub. The first step in this process was the recognition of stablecoins, which are cryptocurrencies backed by fiat currency, as a valid form of payment within the country.
While the European Union is set to officially implement its Markets in Crypto Assets (MiCA) regulation across member states on December 31, the UK’s crypto framework is still under development. However, there is more than one reason to be optimistic about the UK’s preparedness to become an international crypto hub.
Let’s look at the five reasons why the United Kingdom is poised to become a light-bearer for the crypto industry:
1. FCA Allows Crypto-Backed ETNs
The Financial Conduct Authority (FCA), Britain’s financial watchdog, has greenlit exchange-traded notes (ETNs) backed by Bitcoin and Ethereum. Following the go-ahead from the regulator in March, the London Stock Exchange (LSE) said it will accept applications from asset managers and ETN issuers interested in launching financial products tracking the price of major crypto assets.
But there is a caveat, the crypto ETNs will only be available to retail investors, a decision seen as limiting the asset class by many experts. Nevertheless, the FCA’s decision could set the stage for a new market segment in the UK.
2. Law Commission Accomodates Digital Assets
The Law Commission, Britain’s most influential legal review body, has announced that the country’s property laws are flexible enough to accommodate crypto assets. Individuals and businesses involved with cryptocurrency welcomed the Commission’s findings as it provides much-needed clarity around how the asset class will be treated by the court from here on.
The move places the UK ahead of its European counterparts, which have less flexibility within their legal systems to acknowledge cryptocurrency and must alter their civil codes to ensure that digital assets can be recognized as personal property.
3. Bank of England and FCA Launch Securities Tokenization Sandbox
Britain’s central bank, the Bank of England, together with the FCA has launched the Digital Securities Sandbox, which will allow investment banks to tokenize securities like stocks and bonds.
Concerned authorities are currently modifying existing regulations to allow companies to experiment with trading securities on blockchain networks in a controlled environment. The program overseen by the FCA and the Bank of England has been underway since January and will run for 5 years.
4. Stablecoins Recognized as Legal Form of Payment
The UK government is working hard to complete the new rules recognizing fiat-backed stablecoins as a method of payment in the country. Apart from payments, the Treasury has outlined a proposal that encompasses issuance, exchanges, investment, custody, and lending of these fiat-pegged digital currencies.
5. FCA Implements Stricter Regulations for Crypto Firms
The UK’s financial watchdog has set the bar high for crypto service providers to conduct operations in the country. The FCA is now in charge of overseeing the sector and only approving companies that fully comply with its consumer protection and legal requirements. The regulator is expanding its team to understand the new asset class from a broader perspective.
Read More: Why Do UK Banks Oppose Crypto?
