UK Crypto Regulation Lags Behind EU and US

Regulatory Overhaul Led by the Treasury and FCA

The current regulatory overhaul in the UK is led by the Treasury and the Financial Conduct Authority (FCA). The Bank of England targets a 2025 decision on a digital pound. The framework aims for depth over breadth, integrating cryptoassets into mainstream securities laws by 2026.

New regime changes will introduce six regulated activities, affecting assets such as ETH and BTC. Institutional credibility is expected to enhance once these regulations become live, but uncertainty remains until then. Firms will require authorization, impacting both UK-based and non-UK service providers.

Market Impact and Competitive Edge

The market impact is profound as the UK may lose its competitive edge without accelerating its regulatory pace. The threat posed by the EU’s active MiCA regulation emphasizes this urgency. Complexity and transition costs increase for businesses due to the need for compliance with evolving UK laws.

Experts suggest the UK’s approach, focusing on embedding regulations into the existing financial system, brings depth but adds challenges. Historically, regions shifting regulatory frameworks have faced temporary market retractions and increased compliance costs. The trajectory shows a need for swifter action to maintain its financial leadership as other global centers move ahead with faster regulatory action. As the OMFIF states, “Financial centers come and go,” prompting the need for the UK to act decisively.