Key Takeaways

• UK wants to offer a more crypto-friendly, lighter-touch regulatory environment than EU or U.S,
• Andreessen Horowitz said Britain was on “the right path to becoming a leader in crypto regulation”
• Crypto exchange exodus from the U.S. could make it harder for Americans to trade digital currencies

The United Kingdom division of the cryptocurrency exchange Bitstamp has been added to the list of companies that entered the crypto register of the UK Financial Conduct Authority.

Following around six months — the FCA added Hidden Road Partners and MoonPay in December 2022 — Bitstamp UK Limited and Interactive Brokers Limited joined other registered corporations in the UK, according to the FCA list of registered crypto-asset enterprises as of June 13. In accordance with rules for anti-money laundering and countering the financing of terrorism, among others, the FCA named 42 registered cryptocurrency firms.

How Does FCA Work?

Companies in the UK that are allowed to “carry out crypto asset activities” are required to enter the crypto register with the FCA or to have been given temporary operating permission. The financial watchdog previously issued “shut down or face further action” orders for local crypto ATM providers, as well as a suspension order for Binance Markets Limited’s UK operations.

To provide cryptocurrencies a bigger role in the country’s financial services sector and to foster innovation in the field, lawmakers in the UK have been advocating a comprehensive legal framework for crypto-assets.

FCA says  it wants to see how it might strengthen market integrity of the asset class with its counterparts around the world, given how crypto transcends national boundaries.

The Government’s consultation suggests granting authority to FCA over entities engaged in cryptocurrency-related activities that don’t originate from or have a basis in the UK but do offer services to UK customers.

The Treasury may decide to implement equivalent rules in the future. There, companies with authorization from overseas will be able to offer services in the UK without the need for a local presence. Equivalent standards and a suitable and efficient framework for collaboration must exist in that nation for this to operate.

However, FCA admits, the development of many jurisdictions’ approaches to regulating crypto assets and crypto asset services is still in its early stages.

And What is SEC Doing?

The SEC identified nine crypto assets that it deemed to be securities in July 2022 as part of an insider trading prosecution.

The largest US cryptocurrency trading platform, Coinbase Global, was sued by the SEC on June 6 over claims that it had improperly listed several currencies.

The SEC sued the global cryptocurrency exchange Binance the day before in an effort to prevent its founder from trading on the U.S. securities market.

The enforcement marks a turning point for a sector that appeared to be gaining popularity among the general public only a year ago.

As of June 6, the SEC, led by chairman Gary Gensler, had made it clear that it regarded coins with a combined value of US$120 billion (S$161 billion) as unregistered securities.

According to the SEC, cryptocurrency staking, which rewards users for allowing their tokens to be used to support blockchain transactions, is subject to the same securities regulations.

Cracking Down U.S. Crypto Market

The enforcement marks a turning point for a sector that appeared to be gaining popularity among the general public only a year ago. With an anti-government mindset, cryptocurrencies were developed as a decentralized financial system that would function outside of the control of regulators. However, as the industry grew in 2021, cryptocurrency firms established a lobbying network in Washington and sought to reinvent themselves as a law-abiding company eager to collaborate with the government.

That endeavor has mostly fallen short. A string of cryptocurrency collapses in 2017 raised a lot of skepticism about the sector. The public, Congress, and regulators have all shown increasing hostility.

After Sam Bankman-Fried’s cryptocurrency exchange, FTX, went down in November, new tensions erupted. In the months that followed, the SEC filed lawsuits against other cryptocurrency loan businesses and took action against an investment product promoted by well-known U.S. exchange Kraken.

Coinbase and other significant U.S. cryptocurrency companies have lobbied lawmakers in Washington to draft regulations specifically for the digital asset sector in an effort to combat the tightening regulatory environment. However, as a result of the failure of those initiatives, some crypto businesses have begun to seek outside.

Coinbase CEO Brian Armstrong said the U.S. needs clear rules governing encryption during a conference in London in April. These businesses will be established in offshore havens, he predicted, if the United States does not have this.

Already taking steps in that direction, Coinbase. The company said in May that it would launch an international exchange with a Bermuda basis that would let users from other countries engage in high-risk, high-reward trading that is prohibited in the US.

Gemini, the cryptocurrency exchange created by Tyler and Cameron Winklevoss, said at the beginning of June that it was looking to operate in the Emirates . The release highlighted statistics demonstrating that the UAE has surpassed the U.S. in terms of usage of cryptocurrencies.

Bittrex said in March that it would stop conducting business in the United States , citing “the current U.S. regulatory and economic environment.”

Why the UK?

Last but not least, to move its operations from the U.S., the Silicon Valley venture capital company Andreessen Horowitz chose London as its first international hub. The company, which has assets worth over $35 billion, justifies the action as a response to the legal problems the crypto market is currently suffering as a result of SEC restrictions.

Chris Dixon, the head of crypto investing at Andreessen Horowitz, wrote in a blog post : “While there is still work to be done, we believe that the UK is on the right path to becoming a leader in crypto regulation.

“The UK also has deep pools of talent, world-leading academic institutions, and a strong entrepreneurial culture.”

He stated that UK legislators and regulators were adopting a strategy that was “uniquely tailored” to regulate digital assets and blockchain, a decentralized system of record keeping that tracks Bitcoin ownership but also serves other purposes like serving as the foundation for contracts. A $4.5 billion (£3.57 billion) fund to invest in cryptocurrency and blockchain startups was established by Dixon’s company last year.

However, there are also indications that some policymakers are hostile to the industry. The cross-party Treasury committee of the UK parliament stated in a report last month that digital assets like bitcoin have “no intrinsic value” and that UK authorities should regulate cryptocurrency trading as a kind of gambling.

Regulations are being tightened by the UK banking authority as well. Beside the crypto register, the FCA issued new regulations for cryptocurrency advertising in UK this month, including the need for businesses offering cryptocurrency products or services to clearly state any associated risks in their advertisements.

Here are Some of the Crypto Companies That Got FCA Licence: