UK government to unveil cryptocurrency regulation blueprint amid U.S. competition
UK Treasury prepares legislation for stablecoins and staking
The UK government intends to present a comprehensive plan to regulate the cryptocurrency industry, aiming to position itself as a viable alternative to the United States, where former President Donald Trump has promised favorable policies towards cryptocurrencies.
The regulatory plan, expected to be announced this month, is intended to reassure cryptocurrency companies of the UK's commitment to supporting a thriving digital asset ecosystem, according to Bloomberg.
Insiders report that the UK Treasury plans to introduce two pieces of legislation focused on stablecoins and staking services. Stablecoins, digital tokens pegged to assets such as the US dollar, are designed to provide greater stability in the volatile cryptocurrency market. Meanwhile, the regulation will seek to make an exception for staking services, allowing these offerings to avoid classification under current financial regulations that could subject them to strict scrutiny.
Trump's return to the US political landscape has reinvigorated the cryptocurrency industry, and many in the sector view his stance as highly favorable. His proposals include firing the current US Securities and Exchange Commission Chair, Gary Gensler, establishing a government Bitcoin reserve, and ensuring that all future Bitcoin mining takes place on American soil. Such promises have heightened concerns that British crypto companies might migrate to the US, where the regulatory environment could soon become more accommodating.
Current situation and regulatory outlook
The UK’s initial crypto legislation update was anticipated under former Prime Minister Rishi Sunak, who promised to make the United Kingdom a global hub for digital assets. However, following Sunak’s call for a general election in July and the rise of Labour’s Keir Starmer to power, these plans were delayed. Starmer’s administration initially shelved the initiative, but a recent surge of interest in cryptocurrency has led the government to revisit the promotion of crypto-friendly regulations.
The Financial Conduct Authority (FCA) is expected to release a roadmap for industry consultations on stablecoins, with further regulatory steps anticipated next year. The FCA and the Bank of England also plan to update the sector on their joint digital securities sandbox—a testing ground for blockchain-based financial products.
The UK crypto industry has increasingly called for regulatory clarity, especially as the European Union’s Markets in Cryptoassets (MiCA) regulation approaches full implementation. Industry experts, including Laura Navaratnam from the Crypto Council for Innovation, argue that the UK has a “second-mover advantage” in crypto regulation but must act swiftly to capitalize on it.
The UK Treasury has committed to providing further regulatory clarity by 2024, following earlier consultations on fiat-backed stablecoins and the passing of the Financial Services and Markets Act in mid-2023.
It is worth noting that the FCA previously stated it has no intention of relaxing cryptocurrency regulations, citing the need to protect consumers and maintain the integrity of the financial system.
