UK Prime Minister Rishi Sunak at 10 Downing Street.
Dan Kitwood | Getty Images
Cryptocurrency firms and investors in the UK have high hopes that new Prime Minister Rishi Sunak can upend Britain’s fading crypto aspirations.
The new British leader, who was finance minister in the government of former Prime Minister Boris Johnson, is facing a daunting task list, which includes undoing the economic havoc caused by his predecessor, Liz Truss. Crypto is not high on his list of priorities, but industry insiders say there is reason to be optimistic.
“The sentiment among entrepreneurs is a relief,” said Christian Weiss, co-founder of digital lending startup LendInvest. “There is a feeling that we finally have a sane person at rank 10, after the arrogance and impotence of Liz Truss and [ex-Finance Minister] Quasi Quarting nearly collapsed the UK economy.”
Weiss, who also heads the Fintech Founders Network, added, “Rishi sees the opportunity and potential that cryptocurrency has, and wants the UK to be a leader in it.”
Sunak, a former analyst at Goldman Sachs, has on several occasions expressed a positive attitude towards cryptocurrencies. As the Minister in charge of Finance in Britain, he outlined a grand plan To make the country a global cryptocurrency hub in April. This included bringing in stablecoins within regulatory parameters and getting Royal Mint, the UK’s official coin maker, to launch an unbreakable token.
At a drinks reception organized by venture capital firm Index Ventures in June, Sunak said he was “determined” to make the UK “the preferred jurisdiction for crypto and blockchain technology”.
But after weeks of political instability, crypto firms and investors are wondering what he will do to boost the market, which is licking its wounds after a few months punishing digital asset prices and a slew of corporate bankruptcies.
“unusually disorganized”
Prior to Sunak’s appointment as prime minister, confidence in the UK’s standing in the global cryptocurrency market was waning.
In a survey of 300 British fintech founders, only 9% believe they are leading the way in the crypto space. Nearly 20% of founders believe the regulator was “actively suggesting” that the UK is not the right place to start a crypto company, according to a survey by Fintech Founders.
The Financial Conduct Authority has been criticized for being slow to approve licenses for crypto companies, an issue that has caused many companies to terminate and set up stores elsewhere in Europe. Fintech Revolut recently won a license to its crypto entity after several deadline extensions to finalize approvals.
For its part, the Financial Conduct Authority (FCA) says that a significant number of applicants did not meet its criteria on preventing money laundering.
“I find it sad that this is yet another example of the UK behaving in an uncharacteristically disorganized way,” Matteo Perucchio, head of international affairs at Wave Financial, a fund manager focused on cryptocurrency, told CNBC.
While Switzerland is an example of a country that has been “adept” at attracting crypto-exchange-traded products, or ETPs, among other products, Perucchio said.
However, the UK is home to a fairly active crypto market. According to data from Chainalysis, $233 billion of digital assets were in circulation from July 2021 to June 2022. It did not grow as much in Germany, where on-chain activity rose 47% year-on-year.
As London looks to rival the European Union’s financial centers post-Brexit, crypto may be a way for it to improve its chances, industry insiders say.
“There is an opportunity to provide clarity to the industry and allow it to play its part in fulfilling its mandate to encourage companies to invest, innovate and create jobs in the UK,” Jordan Wayne, UK public policy chair at Chainalysis, told CNBC.
What can he do?
Sunak could seek to align the efforts of various UK regulators to monitor cryptocurrency, something President Joe Biden has pushed for in the US
While the British government has kept the door open to digital currencies, officials at independent regulators have taken a tougher tone on the sector.
Another way Sunak could boost cryptocurrency in the UK is by promoting the Bank of England’s work in exploring central bank digital currency.
In April 2021, Sunak’s finance department launched a joint task force with the central bank looking into the feasibility of a token recognized as equivalent to the British pound. It’s called “Bitcoin,” although it probably won’t look like Bitcoin, which is a decentralized and volatile currency.
“We may now see an acceleration of work being done on those proposals — one that needs to be watched in the next few months,” Varon Paul, director of market infrastructure for crypto software company Fireblocks, told CNBC.
The Federal Reserve, the European Central Bank, and other central banks are studying their own digital currencies. But China is at the fore in the CBDC race, with a digital version of the yuan already being actively tested in several provinces.
More than anything, crypto investors would like to see Sunak give the industry some clarity. In the United States, the government Release a framework for cryptocurrency. The European Union agreed to a Comprehensive set of laws govern the sector.
The UK has the Financial Services and Markets Act, which aims to make the country’s financial sector more competitive after Brexit. It is currently touring in parliamentary votes, but once passed, it will recognize crypto assets as regulated products.
“One would expect the road to regulatory clarity to be much shorter with [Sunak] Martin Heisbuck, head of blockchain and crypto research at trading platform Uphold, said in an email comment.
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