Yesterday, King Charles III signed into law the UK bill that gives regulators the power to oversee stablecoin and crypto.
The bill had already been approved by Parliament, so the King’s signature effectively made it a law of the land.
Regulation: the new crypto and stablecoin bill
The UK government’s official press release states that the Financial Services and Markets Bill will give the UK economy a “rocket boost” by enabling the creation of an open, sustainable and technologically advanced financial services sector.
The new law, known as the Financial Services and Markets Act 2023, is a key step in realising the UK government’s vision of growing the economy by strengthening the UK’s competitiveness as a global financial centre.
On the other hand, the current prime minister, Rishi Sunak, is a cryptocurrency advocate, and back in 2022, when he was not yet prime minister, he said they wanted to regulate stablecoins.
The idea is to make London a global crypto hub.
The Financial Services and Markets Act 2023 doesn’t focus on cryptocurrencies and stablecoins, but it does include a section on them.
In particular, it repeals old laws that the UK was forced to implement by the EU before Brexit, with the aim of unlocking billions in investment to innovate and grow the economy.
According to the government, the new rules will put the UK on track to become one of the most dynamic and competitive financial services centres in the world.
The impact of crypto regulation on stablecoin market
Following the entry into force of the European MiCAr, the United Kingdom now has a regulatory framework for stablecoins and cryptocurrencies.
However, the Financial Services and Markets Act 2023 only gives the government the task of regulating the crypto sector, so it will be up to the Treasury, the FCA, the Bank of England and the Payment Systems Regulator to introduce and enforce concrete rules to regulate the sector.
Instead, in the European Union, almost everything has been decided, and all that remains is for individual countries to transpose the new rules and integrate them into their regulatory codes.
All of this is expected to happen in 2024, so nothing has changed from a regulatory perspective for now. But in both the EU and the UK, the regulatory situation should finally be clarified next year and the rules that crypto operators will be forced to apply will be certain.
Therefore, at the moment, it is not possible to know what the real impact of the new UK crypto regulation will have on stablecoin and cryptocurrencies. In fact, since everything is up to the government authorities, it is not even possible to guess with certainty what will happen.
In the EU, on the other hand, the picture is already clearer and it cannot be ruled out that the concrete decisions that will be taken in the UK will closely follow those that have already been taken in the EU.
In particular, the Law Commission has already stated that crypto assets could be recognised in the UK as a new category of personal property that will include all digital assets, as these digital assets, such as cryptocurrencies and NFTs, do not fall within the traditional categories of personal property that already exist.
The hypothesis circulating is that the government will create a specific group of experts to advise on legal issues relating to digital assets.
The British approach
The UK’s approach to crypto regulation appears to be different from that of other countries, especially when compared to the US and the EU.
For example, in Switzerland, which appears to be the main European crypto hub to date, regulation is specific and has been in place for several years.
Dubai, on the other hand, seems to be more permissive.
In the EU, it does not seem to be very lax and will only come into full effect next year.
In the US, it is simply not there yet.
The UK has opted for a softer and more dynamic approach, very different from both the EU and Switzerland. As the US has decided not to follow the EU’s rigid approach for the time being, it is conceivable that it may take a cue from the UK’s original approach and leave the actual regulation to government agencies.
The UK’s decision seems to be aimed at giving crypto operators more leeway, precisely with a view to attracting them to become a crypto hub. In this respect, it seems to be closer to Dubai than to Switzerland and the EU.
Ultimately, it remains to be seen which approach will pay off more, not only in economic terms, but also and above all in legal and social terms.
While a more inclusive approach will certainly help the crypto sector grow, it could also cause social problems if, for example, it encourages an overly unscrupulous attitude on the part of crypto operators themselves.
In the US, for example, we have seen what it means to not regulate crypto exchanges with the FTX case, which caused a lot of damage to the crypto sector, especially to investors.
In Switzerland, which has been Europe’s main crypto hub for years, there have apparently been no such problems.