23rd October 2024 – (London) The landscape of cryptocurrency regulation in the United Kingdom remains clouded with uncertainty, leaving companies in search of relief from Europe’s Markets in Crypto-Assets Regulation (MiCA) without a clear alternative, as noted by industry insiders.
Sophie Bowler, the chief compliance officer at the U.K.-based Zodia Custody, foresees a potential “short-term shift” from the European Union to the UK in response to MiCA’s stringent requirements.
In the Chainalysis’ 2024 Geography of Cryptocurrency Report, Bowler remarked, “For firms that are unable or unwilling to meet MiCA’s requirements, there may be a short-term shift to the U.K. market.”
While there may be a willingness among cryptocurrency companies to explore other markets ahead of MiCA’s anticipated late 2024 deadline, executives at the U.K.’s self-regulatory trade association, CryptoUK, and crypto risk intelligence firm Merkle Science caution that a move to the U.K. might not provide the desired solution.
The U.K.’s regulatory approach to cryptocurrencies is deemed to introduce “unpredictability” by Natalia Latka, the director of public policy and regulatory affairs at Merkle Science. She highlighted the significant challenges that MiCA’s regulations pose for foreign crypto asset service providers and stablecoin issuers, potentially leading to market isolation and relocation considerations among local firms.
Latka pointed out that while the UK might seem like a nearby option for businesses seeking respite, it presents its own set of challenges, including regulatory uncertainty and operational complexities compared to MiCA. The phased approach to crypto regulation in the U.K., she argued, adds further unpredictability, citing obstacles like the lengthy registration process with the UK’s Financial Conduct Authority.
Su Carpenter, the executive director of CryptoUK, echoed Latka’s concerns, noting that the U.K.’s regulatory progress has been hindered by delays stemming from the general election and change of government in July. Despite advancements in regulatory consultations in late 2023 and early 2024, the U.K. has not moved forward with the subsequent stages of implementation.
Carpenter highlighted the lack of clear direction from the new Labour government regarding their stance on the digital asset sector, expressing doubts about companies opting for a jurisdiction lacking regulatory clarity due to the costs and resources involved.
Comparing the U.K.’s regulatory approach to the EU’s MiCA, Carpenter suggested that the U.K.’s strategy will not mirror MiCA entirely, as adjustments are necessary to accommodate the evolving crypto industry. She concluded that MiCA presents the U.K. government with an opportunity to capitalize on potential shifts from the EU by offering a more favourable regulatory environment for companies seeking stability.
