UK Announces Aim to Become a Global Hub for Crypto Tech

Key Highlights

• The UK’s Finance Ministry announced plans to create legislation to bring certain stablecoins into the regulatory framework.
• UK Finance Minister Rishi Sunak said he wants the UK to become a global hub for crypto technology.
• The UK government aims to deliver a “world-leading” regulatory regime for crypto, said UK financial services minister John Glen.

The UK’s Finance Ministry on Monday announced that it intends to create legislation to bring certain stablecoins, when used as in payments, into the regulatory perimeter. Moreover, the Finance Ministry said that it is the government’s intention to hold consultations later this year on regulations for a broader set of crypto-related activities.

Stablecoins are cryptocurrencies whose value is pegged to that of fiat currencies like the US dollar, euro and UK pound. Because stablecoins offer their holders protection from the volatility seen elsewhere across cryptocurrency markets, they are seen by many as having greater utility as a medium of exchange for consumers.

The UK Finance Ministry acknowledged that certain stablecoins have the potential to become a widespread means of payment, including by retail customers. An amended e-money framework could deliver a consistent framework for the regulation of stablecoin issuance and for the provision of wallets and custody services, the Finance Ministry added.

The UK government plans to extend the scope of the 2009 Banking Act and 2013 Financial Services Act to cover stablecoin activities and ensure that relevant stablecoin-based payments systems are subject to appropriate competition, said the Finance Ministry.

World Leading Regulatory Regime

UK Finance Minister Rishi Sunak released a statement alongside the Finance Ministry announcement in which he outlined his desire for the UK to become a global hub for crypto technology. “The measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country”, he said.

Speaking to UK Fintech Week, UK financial services minister John Glen said that the government had a detailed plan and that regulation would help consumers use stablecoins for payments with more confidence. The UK government’s consultations later this year would aim to build a “world-leading” regulatory regime for the rest of the crypto market, he said.

However, some have criticised the UK government for lagging its peers when it comes to regulating crypto. Earlier this year, former U.K. Chancellor of the Exchequer Philip Hammond said that it was “frankly quite shocking” that the country is so far behind its European counterparts with regulations for crypto assets. He warned that the U.K. might face losing talent and its long-running status as a finance hub.

Pro-crypto Stance of the UK Government

Sources speaking to CNBC last week, who at the time correctly alleged that the UK government would soon reveal plans to regulate the crypto sector, said that government officials have shown a willingness to understand the industry’s complexities. The UK Finance Ministry had allegedly been in contact with a number of crypto firms and trade groups, including the Winklevoss brothers’ exchange Gemini.

Bank of England policymakers have been less than complimentary in their public commentary on the crypto sector, with the bank’s governor Andrew Bailey on Monday calling crypto the “new front line” for criminal scams. But they are at least on board with the government’s regulatory push – last Thursday, the bank called on lawmakers to expand the regulatory framework for crypto to protect financial stability.