The UK sends a positive signal on crypto regulation and aims to become a global crypto asset technology center

Faced with a cryptocurrency market worth more than $2 trillion and a growing trend of global popularity, the United Kingdom is sending positive signals and is expected to become the latest country to fully regulate the industry.

This week, the UK announced a detailed plan to create a "Global Crypto Asset Technology Center", including a package of measures such as focusing on the regulation of stablecoins, entrusting the Royal Mint to create NFTs to be issued this summer, and reviewing the tax system.

Stablecoins are a regulatory focus in the UK

Like financial regulators in major economies around the world, the UK has also put the regulation of stablecoins on the agenda. John Glen, the UK Treasury’s economic secretary, called stablecoins “an area of ​​immediate potential and worthy of attention in the cryptocurrency space.”

On April 4, Glen said in a keynote speech at the Innovate Finance Global Summit that the UK will legislate to bring some stablecoins under regulation "as part of an ambition to provide a world-leading regulatory regime for stablecoins" to follow the existing payment framework.

Currently, most stablecoins are anchored to fiat currencies or other assets with stable value. Among them, Tether, the stablecoin with the largest market value, is pegged to the US dollar.

Data from Coin Metrics shows that as of the end of February this year, the total market value of stablecoins was about US$180 billion, far higher than about US$38 billion a year ago.

The U.K. Treasury has yet to confirm which stablecoins will be regulated.

Deng Jianpeng, a professor at the School of Law of the Central University of Finance and Economics, told the Blockchain Daily reporter that “it is natural for stablecoins to be regulated by the United Kingdom, the United States and other countries. On the one hand, stablecoins play an important role in the crypto market, and their growth has a great influence on the price of cryptocurrencies. ”

“ On the other hand, stablecoins have expanded from simple cryptocurrency investment and financing to other fields, and are even used as salary payments in the real world, ” Deng Jianpeng added. “Plus, stablecoins are mainly run on blockchains, and it is difficult to figure out where the funds flow, so there are risks such as money laundering and terrorist financing in this gray area.”

At present, some US senators have published their draft stablecoin bills; the European Central Bank also plans to impose strict supervision on stablecoins. According to reports, it has asked EU legislators to obtain veto power over private stablecoin projects.

When asked whether the regulation of stablecoins needs to be consistent worldwide, Deng Jianpeng believes that "it would be better if it is consistent." Otherwise, once there is a regulatory loophole in a country or region, it is likely to be used for illegal and criminal activities.

The UK wants to become a "global center" for cryptocurrency

In his keynote speech at the Innovate Finance Global Summit, Glen also said that he had commissioned the Royal Mint to issue NFTs this summer, which would serve as "a symbol of the forward-looking approach we are determined to take."

In addition, the announced measures also include that the UK government may review the tax system to "make it easier for crypto to play a role"; at the same time, it will eliminate the disadvantages for UK fund managers to hold cryptocurrencies in their portfolios.

In addition, the UK will also establish a high-level crypto asset group and jointly organize the "Crypto Sprint" series of events with the UK Financial Conduct Authority (FCA) to study the legal, technical and regulatory challenges facing the industry, thereby guiding the country's next steps in the crypto field in the future.

To support the UK’s determination to create a “global crypto asset center,” Glen also hopes to position the UK as a jurisdiction that supports innovation, enabling the country to attract some “(blockchain) companies that do not yet have a fixed headquarters.”

However, before sending a positive signal to the outside world that the UK supports the development of the encryption field, British regulators have strengthened their scrutiny of the encryption industry.

The UK has been cracking down on “misleading” crypto asset advertising since the beginning of this year, and only businesses regulated by the Financial Conduct Authority (FCA) or the Bank of England are allowed to publish their own crypto asset promotions.

In addition, according to anti-money laundering regulations, cryptocurrency companies operating in the UK must register with the FCA. Although the FCA postponed the deadline for cryptocurrency company registration to June this year and allowed companies to continue trading while seeking full authorization, some companies have closed their crypto businesses in the UK and moved abroad.

According to Bloomberg, former British Chancellor of the Exchequer Philip Hammond said in January that “the UK has fallen behind other financial centers such as the European Union in developing clear regulations for the emerging crypto industry.”

From strict supervision to positive signals sent by the authorities regarding the development of the crypto industry in the UK, Cai Kailong, an expert at the Whale Platform think tank and founder of Houlang Finance, said he "does not think this is a turn in the UK."

Cai Kailong pointed out to the Blockchain Daily reporter that the UK's regulation of stablecoins and the "regulatory sandbox" system are all subject to prerequisites. These include not harming the interests of investors, complying with KYC (know your customer) and AML (anti-money laundering) rules, and must be under government guidance.

"There are too many gray and black areas in crypto assets. The government must eliminate these before actively promoting it." Cai Kailong said, "So I don't think this is a shift. It is a very natural expression."

Mixed signals from major economies

Early last month, U.S. President Biden signed an executive order titled “Ensuring the Responsible Development of Digital Assets,” requiring the United States to maintain its global leadership in the digital asset field.

On March 14, MEPs also agreed on draft rules for the regulation of crypto assets, consumer protection, and environmental sustainability.

Bitcoin scholar Gu Yanxi said in an interview with reporters that the US President’s executive order on digital assets will not only affect the development of digital assets in the United States, but will also "definitely affect the decisions of other countries." This is because the digital asset industry is developing very rapidly, which is a well-known fact.

He pointed out: "Biden wants to keep the United States at the forefront of this industry, which will further prompt other countries to think more deeply about this and make corresponding decisions."

On the same day Biden signed the executive order, Dubai approved the Virtual Assets Law and established the Dubai Virtual Assets Authority.

Cai Kailong pointed out that the mixed "regulatory" signals from major economies in the world, such as the United Kingdom, the United States, and the European Union, mean that the trend in the encryption field has become "unstoppable," and therefore regulation is inevitable.

"The emergence of regulatory signals is not a bad thing. In the future, more countries will gradually incorporate crypto assets into the existing regulatory system. This is a necessary condition for the healthy and long-term development of the industry and is also a good phenomenon," he said.