Recent events in the UK raise questions about the country's ambition to be a global crypto hub.
- In 2023, the US took a decidedly anti-crypto stance, pushing many firms abroad.
- For a time, the UK looked as if it might win some of that fleeing business.
- However, despite rosy new figures, the UK may soon be following on a similar path.
Across the crypto industry, the United States is widely considered to have self-immolated this year. Whereas it was once a global leader, both in regulatory heft and the number of firms it called home, 2023 has seen its star wane.
Major exchanges like Coinbase, Gemini, and Bittrex have announced plans to expand into overseas markets or halt US operations entirely. A mix of strict and unclear regulations has pushed firms to jurisdictions like the Cayman Islands, Dubai, and the United Arab Emirates. Not one to be upstaged, the United Kingdom has asked the US to hold its beer while it embarks on its own mission to scare away crypto industry investment.
Banks Help Scupper Sunak’s Crypto Hub Dream
In April of last year, Rishi Sunak, then Finance Minister, unveiled plans to make the UK a “global crypto asset hub”. However, despite Sunak’s ambitions, and his rise to the top job, it appears not everyone in the UK is onside.
News that Binance will stop serving UK customers due to strict new advertising rules published, has raised questions about the country’s friendliness to the industry. But it’s not just regulators putting up barriers.
Earlier this year, several major British high street banks including NatWest, HSBC, Chase and Santander have introduced restrictions on how much money customers can transfer to cryptocurrency exchanges. NatWest has set a £1,000 daily limit and a £5,000 30-day limit on payments to crypto exchanges. HSBC has stopped customers buying crypto with their credit cards altogether.
Consequently, this has sparked debate about whether the banks are overstepping in limiting consumers’ financial autonomy versus appropriately protecting customers from volatility and scams. Critics argue the caps seem excessive given most Brits invest less than £5000 total in crypto.
However, advocates contend the limits are justified to protect vulnerable consumers from crypto scams which extracted over $2.57 billion globally, according to the FBI . Ultimately, high street banks’ conservative, risk-averse cultures are on a collision course with Sunak’s tech-bro optimism.
Financial Services Minister Warns Regulator
Government ministers are also conflicting with the UK’s Financial Conduct Authority (FCA), the country’s chief financial watchdog. City Minister, Andrew Griffith, responsible for the UK’s considerable financial services sector, urged the regulator to take a more lenient approach to new cryptocurrency advertising rules that came into effect in October 2023.
In an October 5 letter to FCA chief Nikhil Rathi asking the regulator to exercise “forbearance” and provide more guidance to crypto companies struggling to comply with the stringent new standards, according to the Financial Times . The rules ban unauthorized crypto firms from marketing to UK consumers, part of the FCA’s efforts to increase protection following recent volatility and scandals.
However, Griffith contends the scope is too broad and compliance guidance insufficient, warning the regime could drive crypto businesses away from the UK. His plea underscores tensions between the government’s aim of making the UK a crypto hub, and the FCA’s risk-averse approach to regulating the nascent sector.
UK Is Already An European Crypto Hub, For Now
Ahead of strict new rules on crypto promotions going into effect in October 2023, major platforms like Bybit and Luno announced they are suspending services to UK clients. Even payments giant PayPal has halted some crypto offerings in the country until it ensures compliance.
The prize for the UK if it can entice crypto companies to stay is significant. New data released on October 18 reveals that the UK is the world’s third largest digital asset economy, and the biggest in Europe in terms of raw transaction volume, receiving an estimated $252.1 billion in the past year. A market most firms are keen to tap into, as long as the conditions are right.
While UK-registered platforms like Kraken say they won’t halt operations, the exodus of unregistered players highlights difficulties in luring crypto business to Britain. Firms can register with the FCA or find an authorized partner to approve ads, but industry reputational damage after the cataclysm of 2022 makes the latter option unlikely.
