What Rishi Sunak as Prime Minister Means for the UK Crypto Industry
British Prime Minister Rishi Sunak at 10 Downing Street.
Dan Kitwood | Getty Images
UK cryptocurrency businesses and investors have high hopes that new Prime Minister Rishi Sunak can turn around Britain’s waning crypto aspirations.
Britain’s new leader, who was finance minister in former Prime Minister Boris Johnson’s government, faces a daunting to-do list, which includes reversing the economic havoc wrought by his predecessor Liz Truss. Crypto isn’t exactly high on its priority list, but industry insiders say there are reasons for optimism.
“The feeling among entrepreneurs is a sense of relief,” said Christian Faes, co-founder of digital lending startup LendInvest. “We feel like we finally have someone sane in number 10, after the arrogance and incompetence of Liz Truss and [ex-Finance Minister] Kwasi Kwarteng nearly collapsed the UK economy.”
“Rishi sees the opportunity and potential in crypto and wants the UK to lead it,” added Faes, who also chairs the Fintech Founders Network.
Sunak, a former Goldman Sachs analyst, has repeatedly expressed a positive attitude towards crypto. As Britain’s finance minister, he outlined a grand plan to make the country a global crypto hub in April. This included bringing stablecoins into regulatory settings and getting the Royal Mint, Britain’s official coin maker, to launch a non-fungible token.
At a cocktail party hosted by venture capital firm Index Ventures in June, Sunak said he was “committed” to making the UK “the jurisdiction of choice for crypto and blockchain technology.”
But after weeks of political instability, crypto firms and investors are wondering what he will do to boost the market, which is licking its wounds after a painful few months for digital asset prices and a slew of corporate bankruptcies. .
Prior to Sunak’s appointment as Prime Minister, confidence in the UK’s position in the global crypto market had waned.
In a survey of 300 UK fintech founders, only 9% believe she is leading the way in crypto. Nearly 20% of founders believed the regulator was “actively signaling” that the UK is not the place to start a crypto business, according to the Fintech Founders survey.
The Financial Conduct Authority has been criticized for being slow to approve crypto business licenses, an issue that has caused several firms to pull out and relocate elsewhere in Europe. Fintech app Revolut only recently obtained a license for its crypto entity after numerous delays in finalizing approvals.
For its part, the FCA says a high number of applicants failed to meet its money laundering prevention standards.
“I find this is unfortunately another example of the UK acting in a very unusually disorganized way,” Matteo Perruccio, international chairman of crypto-focused fund manager Wave Financial, told CNBC.
While Switzerland is an example of a country that has been “brilliant” in attracting crypto exchange-traded products, or ETPs, among other products, Perruccio said.
Still, the UK is home to a fairly active crypto market. According to data from Chainalysis, $233 billion in digital assets changed hands from July 2021 to June 2022. It did not grow as much as in Germany, however, where on-chain activity increased by 47% d one year to the next.
As London looks to compete with EU financial hubs post-Brexit, crypto could be a way for it to improve its odds, industry insiders say.
“There is an opportunity to bring clarity to the industry and allow it to play its part in delivering on its mandate to encourage businesses to invest, innovate and create jobs in the UK,” said Jordan Wain. , head of UK public policy at Chainalysis, told CNBC.
What could he do?
Sunak may seek to align the efforts of various UK regulators on crypto, which President Joe Biden has asked the US to do
While the UK government has kept the door open to digital currencies, heads of independent regulators have taken a tougher tone on the sector.
Another way Sunak is boosting crypto in the UK is by advancing the work of the Bank of England on exploring a central bank digital currency.
In April 2021, Sunak’s finance department launched a joint working group with the central bank on the feasibility of a token recognized as equivalent to the British pound. It has been dubbed “Britcoin”, although it probably bears no resemblance to bitcoin, which is decentralized and volatile.
“We can now see an acceleration of work being done on these proposals — one to watch in the coming months,” Varun Paul, director of market infrastructure at crypto software firm Fireblocks, told CNBC.
The Federal Reserve, European Central Bank and other central banks are considering their own digital currencies. But China holds the lead in the CBDC race, with a digital version of the yuan already being actively tested in many provinces.
More than anything, crypto investors want to see Sunak bring some clarity to the industry. In the United States, the government has released a framework for cryptography. And the European Union has approved an extensive set of laws governing the sector.
The UK has its Financial Services and Markets Bill, which aims to make the country’s financial sector more competitive after Brexit. It is currently making the rounds in parliamentary votes but, once passed, would recognize crypto assets as regulated products.
“One would expect the path to regulatory clarity to be significantly shorter with [Sunak] at the helm,” Martin Hiesboeck, head of blockchain and crypto research at trading platform Uphold, said in an emailed comment.