Cryptocurrency has seen a massive surge in popularity over the last few years, with more and more people investing and large companies beginning to offer digital currency as a payment method. However, while cryptocurrency becomes more widely adopted by the general public, it’s becoming painfully obvious how badly the market needs regulation. The industry is rife with scams like phishing, hacking and rug pulls; meanwhile, the UK government have admitted that there currently aren’t any laws that could be used to govern cryptocurrency, and that’s it’s not even currently considered legal tender in the country.
What’s Happening?
The UK government will likely look at the ways they have regulated gambling sites when they introduce similar legislation directed at the Cryptocurrency industry, with possible mandatory photo ID checks for those that want to invest and the need for platforms to be registered with a regulator.
Chancellor Rishi Sunak has said that he wants Britain to become a global hub for digital currency and wants to legalise stable coins as a form of payment in the UK – in his words this would “spread wealth to parts of the UK which have lacked investment”. But as Sunak has announced his plan to move forward with crypto, including asking the Royal Mint to mint a government-backed NFT and instructing The Treasury to recognise stable coins, there are critics on both sides of the argument.
The Cryptocurrency roadmap currently lacks a lot of detail, but it mentions regulating cryptocurrency by first recognizing stable coins as legal tender, followed by bringing in regulations surrounding these new currencies. Secondly, the minister has announced that the Royal Mint are undertaking the creation and minting of an NFT, which should be issued by the end of this summer. Until recently the UK government have fallen behind on the technology and HMRC has admitted that they have trouble tracking cryptocurrency investments which can lead to potential fraud and tax-dodging.
When Royalty Got Involved
When the Queen opened parliament for the year she included a mention of bills supporting the “safe adoption of Cryptocurrencies” and also discussed giving the government the authority to “seize and recover cryptocurrency assets”. The UK has introduced two bills into parliament. The first, the Financial Services and Markets Bill, is proposed to “cut red tape” in the financial sector and attract investors. The second bill, the Economic Crime and Corporate Transparency bill, gives the government the power to “seize and recover crypto-assets” as well as mitigate risks for individuals targeted by ransomware attacks.
Russ Shaw, the founder of Tech London Advocates referred to the minister’s plans as “a bold step in the right direction”. Shaw said that he believes there needs to be some kind of regulation for digital assets to become more widely accepted, adding that the government’s announcements showed that the UK is “getting ahead of the curve with respect to emerging technology”.
Is Everyone Happy with the News?
Not everyone reacted so positively to Sunak’s announcements and the new cryptocurrency bills. Ed Miliband said that Rishi Sunak’s reputation had “crashed like cryptocurrency” as he attacked the chancellor’s plans to introduce some stable coins as legal tender to the British economy.
Despite the chancellor’s enthusiasm, The Bank of England, which would be responsible for processing at least some cryptocurrency transactions, made their concerns known in a public statement. The governor of The Bank of England, Andrew Bailey referred to cryptocurrency as “the new front line for scammers” as he pointed out that fraudsters have been quick to capitalise on the new financial technology. Bailey also argued against claims that stable coins could develop into a form of safe money. When questioned by the House of Lords he also argued against the idea that stable coins are a better alternative to a centralised currency.
Does The Bank of England Agree?
The bank has repeatedly warned that the cryptocurrency market, now worth an estimated $2.1 trillion, could fundamentally threaten the stability of the UK’s financial market. Despite the concerns of the UK’s central bank, plans to introduce cryptocurrency to the UK economy are moving forward. The Financial Conduct Authority confirmed its plans to help bring regulation up to speed and in line with the latest developments in the cryptocurrency space.
Despite the Bank of England’s concerns, it’s likely that we will see cryptocurrency adopted in the UK to some extent. HMRC have been struggling to keep on top of the new technology, and bringing in legalisation and regulation is the only way to plug the gap that’s allowing people to evade tax.
What Does This Mean for the Future?
The truth is that we simply don’t know what Cryptocurrency regulation will mean for the industry, especially as there are two sides of the coin when it comes to opinions. There will be plenty of people that enjoy Cryptocurrency investment because of the unregulated and untraceable nature, whereas others feel that regulation could help boost confidence for people that want to invest and are unsure. What we do know is that whatever opinions are, this latest UK Government announcement just cements the fact that regulation will be coming into play at some stage. Currently, anyone can start an app, offer to sell Cryptocurrency etc. and there aren’t any regulatory bodies to keep consumers safe – unlike other financial industries where platforms are obliged to be licenced and only to operate under a strict set of rules.
What will be interesting to see how things pan out is exactly what rules they will put in place, but also how these will adapt over coming years. As we have seen with the UK Gambling Commission, often rules in industries like this need revisiting and revising as time passes and the way people use services changes. As such, it is likely that whatever regulations will see initially introduced for Cryptocurrency like the one listed on that X1 payment gateway, these will be adjusted as time goes on – and it will be these that people will be interested in, as they are likely to be introduced in stages depending on how well the initial regulations performed.
