UK may introduce crypto regulations to counter Trump-led US appeal

As the cryptocurrency industry looks to a potential Donald Trump-led US for clearer regulations and promises of global crypto dominance, the British government is preparing to outline its own plans for sector regulation.

Citing sources familiar with the plans, a report by Bloomberg said the Treasury is preparing two legislative proposals: one for stablecoins, which are tokens pegged to more stable assets like the US dollar, and another to create an exemption for staking services, allowing them to avoid current financial regulations.

Plans for stablecoins and staking services legislation

The stablecoin legislation will enable the Financial Conduct Authority to engage with the industry on regulatory guidelines, Bloomberg said.

Stablecoins are digital tokens tied to the value of traditional, less volatile assets such as the US dollar.

Meanwhile, staking—where investors lock their tokens to support blockchain operations in exchange for a small return—is expected to be reclassified.

This reclassification would prevent it from being categorized as a collective investment scheme, which would otherwise subject it to additional regulatory scrutiny.

The FCA plans to publish a roadmap for its plans to regulate the cryptocurrency sector “shortly,” a spokesperson for the regulator told Bloomberg, outlining the timeline for the consultation on stablecoins and the broader regulation of the industry.

The government will also provide an update on the progress of the digital securities sandbox, a real-world testing environment for blockchain innovation, jointly managed by the FCA and the Bank of England, according to sources cited by the news agency.

Trump’s US: a growing threat to the UK’s crypto ambitions

The UK government had initially planned to pass crypto legislation during former Prime Minister Rishi Sunak’s tenure, as part of his 2022 pledge to turn the UK into a global crypto hub.

However, the sudden election call and subsequent change in leadership under Labour’s Keir Starmer delayed the move, pushing the legislation into 2024.

The UK’s delay in cryptocurrency regulation has created uncertainty among crypto firms.

Meanwhile, Trump’s stance on the crypto industry, celebrated by many in the sector, could shift business opportunities toward the US.

Trump has committed to making the US the global crypto capital by firing US Securities and Exchange Commission Chair Gary Gensler, establishing a government-owned Bitcoin reserve, and requiring all Bitcoin mined in the country to be produced on US soil.

This pro-crypto stance, paired with clearer rules, has made the US an increasingly attractive jurisdiction for crypto startups.

UK regulators, however, face the challenge of catching up with international competitors like the EU, where regulations are expected to come into full effect by the end of the year.

Crypto sector urges swift action from the UK

The prolonged lack of regulatory clarity has made many crypto companies hesitant to invest in the UK.

As European competitors move ahead with their regulatory frameworks, industry leaders are urging the government to take swift action.

“The UK has a real opportunity to capitalize on a second-mover advantage, but only if it can mobilize,” said Laura Navaratnam, UK policy lead at the Crypto Council for Innovation, in the report.

“We are a little bit further than even the Treasury and the regulators would’ve ideally wanted.”

The Treasury had previously committed to providing more specific crypto guidelines by early 2024, and industry groups are keen to see this promise fulfilled to maintain the UK’s position as a leader in the digital assets space.

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