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Investing.com – UK investors and companies are placing high hopes that the new Prime Minister, Rishi Sunak, will be able to change Britain’s view of digital currencies.
The new British leader, who was former Prime Minister Boris Johnson’s finance minister, faces a daunting list of tasks, including repairing the economic havoc caused by his predecessor, Liz Truss. Crypto isn’t quite at the top of his priority list, but industry insiders say there is cause for optimism.
“The feeling among entrepreneurs is one of relief,” said Christian Weiss, co-founder of digital lending startup Lund-Invest. “There is a sense that we finally have a sane person, after the arrogance and incompetence of Liz Truss and former Chancellor of the Exchequer, Kwasi Quarting, who almost brought the UK economy into a tailspin.”
Weiss, who also heads the Fintech Founders Network, added, “Ricci sees the opportunities and potential of digital currency, and wants the UK to be a leader in it.”
Sunak, a former analyst at Goldman Sachs, has on several occasions expressed his positive attitude towards cryptocurrencies. As the minister in charge of Britain’s finances, he laid out a grand plan to make the country a global cryptocurrency hub in April. This included bringing in stablecoins within regulatory parameters and an agreement with Royal (LON:) Mint, the UK’s official coin maker, to launch a non-exchangeable token.
At a reception organized by Index Ventures venture capital investment in June, Sunak said he was “determined” to make the UK “the jurisdiction of choice for cryptocurrency and blockchain technology”.
But after weeks of political instability, crypto companies and investors are wondering what he will do to boost a market, which is still licking its wounds a few months after the collapse in digital asset prices and a slew of corporate bankruptcies.
‘uncharacteristically disorganized’
Prior to Sunak’s appointment as prime minister, confidence in the UK’s standing in the global cryptocurrency market was waning.
In a survey of 300 UK fintech founders, only 9% believe they are a leader in cryptocurrency. Nearly 20% of founders believe regulators have been “actively suggesting” that the UK is not the right place to start a crypto company, according to a survey by fintech founders.
The Financial Conduct Authority has been criticized for being slow to approve licenses for crypto companies, an issue that has caused many companies to close and set up stores elsewhere in Europe. Fintech revolution app recently won a license to set up its crypto entity after several deadline extensions to finalize approvals.
For its part, the Financial Conduct Authority (FCA) says that a significant number of applicants did not meet its anti-money laundering standards.
“Unfortunately I find this to be yet another example of the UK behaving in an uncharacteristically disorganized manner,” Matteo Perocchio, head of international affairs at Wave Finance and a fund manager focused on cryptocurrencies, told CNBC.
While Switzerland is an example of a country that has been “adept” at attracting digital exchange-traded products, or ETP, among other products, Perucchio said.
However, the UK is home to a fairly active crypto market. According to data from Chainsys, 233 billion digital assets were traded from July 2021 to June 2022. However, it did not grow as much in Germany, where on-chain activity was up 47% year-on-year.
As London looks to be in competition with the EU’s post-Brexit financial centers, crypto may be a way for it to improve its chances of competition, industry insiders say.
Jordan Wayne, Head of Public Policy at Chainsys, told CNBC. “There is an opportunity to provide more visibility and enable the industry to encourage companies to invest, innovate and create jobs in the UK.”
What can he do?
Sunak could seek to align the efforts of various UK regulators to monitor crypto, something President Joe Biden is working towards in the US.
While the British government has kept the door open to cryptocurrencies, officials at independent regulators have taken a tougher tone on the sector.
Another way Sunak could boost digital currency in the UK is by promoting the Bank of England’s work in exploring the possibility of issuing central bank digital currency.
In April 2021, Sunak’s Finance Department formed a joint working group with the Central Bank looking into the feasibility of issuing a token that is recognized as equivalent to the pound. It has been dubbed “Bitcoin”, and although it will not likely resemble Bitcoin, it is decentralized and volatile.
“We may now see an acceleration in the work being done on those proposals — so that should be followed up in the next few months,” Varon Paul, director of market infrastructure at crypto-software company Fire-Blocks, told CNBC.
The Federal Reserve, the European Central Bank, and other central banks are studying their own digital currencies. But China is at the fore in the CBDC race, with a digital version of CBDC already being actively tested in several provinces.
More than anything, crypto investors would like to see Sunak give the industry some clarity. In the United States, the government has issued a framework for digital currencies. The European Union has approved a comprehensive set of laws governing the sector.
The UK has the Financial Services and Markets Act, which aims to make the country’s financial sector more competitive after Brexit. The government is currently doing the rounds in parliamentary votes on the law, but once it is passed, crypto assets will be recognized as regulated products.
“The path to regulatory clarity is expected to be much shorter with[Sunak]at the helm,” Martin Hesbok, head of blockchain and crypto research at trading platform App-Hold, said in an email comment. [علىرأسالسلطة”