Yesterday at UK FinTech Week 2022, led by IFGS and Innovate Finance, John Glen MP - economic secretary to the Treasury, gave a keynote speech announcing the Government's ambition for the United Kingdom to be the global hub to start and scale crypto companies.
John Glen noted that we are on the "cusp of a technology breakthrough" and the UK planned to "act now and be in from the ground floor". As part of the announcement, John Glen unveiled that the Chancellor had asked the Royal Mint to create an NFT (non-fungible technology) by the summer, which would be an emblem for the UK as a crypto hub. Less gimmicky, however, was the unveiling of the initiatives that the UK will take to increase regulatory scrutiny on digital assets. John Glen noted that the Government was determined to learn quickly by providing more regulatory sandboxes, such as the FCA announcing a series of crypto-sprints to inform policy in real time.
A "detailed plan" was also announced to support the development of a world best ecosystem for crypto. In particular the UK announced it will:
- bring stablecoins (i.e., digital assets that are backed by fiat currency) into the UK payment framework to enable consumers to use stablecoins with confidence. This will be focused on stablecoins initially with a view to widening the gaze and looking at a broader set of crypto activities such as investing in and trading bitcoin;
- ask the Law Commission to launch a consultation to consider the legal status of DAOs (decentralised autonomous organisations);
- bring certain cryptocurrency into financial promotion legislation;
- explore the application of distributed ledger technologies to the debt issuance process and sovereign debt instruments;
- explore the tax treatment for cryptocurrencies, in particular decentralised finance loans and stakes, which allow users to earn interest on their crypto investments;
- lead the way in Web3, a new version of the internet with blockchain being an integral part of it; and
- provide regulators with the right tools to combat the risks with crypto.
It is clear that the UK Government sees cryptocurrency and in particular distributed ledger technologies as having the potential to have a significant impact on a number of industries and the way consumers will transact in the future. However, there are still a lot of trust issues with the technologies and cryptocurrencies are still rife with crypto-cowboys and bad actors. The law will need to be adaptable and it appears the Government recognises this, as John Glen stated the regulation should be seen as "code - to be refined and rewritten". In other words, it will be dynamic and tech neutral.
Furthermore, it is promising that the Law Commission, after running an invaluable consultation on Smart Contracts, will be turning its mind to the legal status of DAOs - which, despite a rocky start (the first DAO was hacked and $60 million of ether (the operative cryptocurrency) was stolen), are gaining more traction with users as a way to collectively invest in and fund projects based on blockchain technologies.
John Glen noted that we are on the "cusp of a technology breakthrough" and the UK planned to "act now and be in from the ground floor"