March 28, 2023

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The UK finds its way to a tougher line on crypto

2 min read

It turns out the UK still wants to be a “global crypto hub”, which feels a bit like volunteering as the landing zone for the fiery wreckage of a plane crash.

Cryptocoins, crypto hype and the crypto bros went down in flames last year. About $2.2tn in market capitalisation of cryptoassets vanished globally in a 75 per cent drop from the November 2021 peak. There have been multiple failures, scandals or frauds, involving so-called stablecoins such as Terra, lending platforms including Celsius, and of course the collapse of Sam Bankman-Fried’s FTX crypto empire.

One school of thought is to let it all burn. The cryptoasset world, while interconnected within its own ecosystem of true believers, managed to implode without causing much aggro for the wider financial system. The message from regulators has generally been that you could lose all your money in this stuff.

But as this week’s government’s consultation makes clear, crypto is going to be regulated — and in a broad way. Up to a tenth of UK adults are estimated to own cryptoassets, says the government, a figure that has doubled over the past couple of years. “By taking a wide set of powers, the UK is trying to future proof itself for a rapidly changing market,” said EY’s Chris Woolard, formerly interim boss of the Financial Conduct Authority. “The question is whether there are things that should be done short term to protect consumers and make space for the industry to develop.”

Frankly, the drama of the last year has done the UK a favour in its policymaking. The worst of the political salivating over being a world-beating crypto innovator is gone. City minister and enthusiast Andrew Griffiths, while noting at a recent select committee hearing that EY had suggested a £60bn opportunity, couched the process in terms of being open-minded about new technology. The regulator and the politicians are, if not on the same page, apparently reading a similar (e) book.

Perhaps as a result, the…



2023-02-01 19:01:06

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