Traditional Finance Lobbies Against UK Crypto Regulation, Citing Risks for Consumers
Several of the U.K.’s traditional financial (TradFi) institutions have warned the government over potential risks in crypto regulation.
While the U.K. government is working on crypto regulations, it faces some objections from TradFi institutions. The institutions have warned the government of cryptocurrency risks regarding preciseness, taxation, and consumer protection.
U.K. Crypto Regulation Brings False Trust?
Amid various concerns, stakeholders in TradFi believe that crypto regulation may instill a false sense of trust among consumers.
According to Financial Times, the Institute of Chartered Accountants in England and Wales (ICAEW) believes that regulation offers “to some extent, unearned trust with customers.” It further says:
By expanding the perimeter and authorizing firms for crypto-related activities, consumers might be justified in concluding that the perceived risks that are known about cryptoassets have been to some extent addressed or managed.
Meanwhile, the International Regulatory Strategy Group, the advocacy group of TradFi institutions, wants the government’s proposal to be “much more precise.”
Also, a tax lobby group is concerned about dealing with crypto transactions. However, HM Revenue and Customs are already working on a solution through separate consultations for taxing crypto and decentralized finance (DeFi) activities.
However, apart from objections, there are no tangible solutions from TradFi lobbies. Are they just trying to halt the innovation through crypto and DeFi?
In February, the U.K. government issued a proposal seeking feedback from industry stakeholders on crypto regulations.
Nimble Approach Compared to MiCA
The Financial Conduct Authority’s (FCA) slow execution has often received some backlash. The FCA is the regulatory body that will oversee crypto regulations.
The U.K.’s crypto regulations law are often compared to the European Union’s (EU) Market in Crypto-Assets (MiCA) law. Andersen LLP executive Zoe Wyatt told the FT:
“We fear that the U.K.’s desire to be a global crypto hub will be usurped by another faster acting jurisdiction. The U.K. is taking baby steps whilst the EU surges ahead.”
Philip Hammond, the former finance minister of the U.K., also believes the country is lagging in the race to become a crypto hub.
Hammond, currently the chairman of the crypto exchange Copper, had to pull back the registration form from the U.K. due to apparent slow processing from FCA.
He says: “Switzerland is further ahead. The EU is also moving faster. There has to be an appetite to take some measured risk.”
Last month, the EU approved the MiCA law for crypto regulation. But the Treasury officials claimed that U.K.’s approach is more nimble than the EU’s MiCA.
The official cited that the government wants to include crypto in a regulatory framework similar to traditional investment instruments such as stocks. They said,
“We are bringing stablecoin and crypto asset activities into the existing financial services framework via secondary legislation. This means that the UK will be able to update regulation as the sector evolves, rather than hard-coding detailed rules in legislation like Mica.”