The United Kingdom (UK) government is gearing up to introduce new regulations for the crypto industry, including stablecoin, in 2022. This initiative was delayed earlier due to the general elections in July, but now the newly formed government under Prime Minister Keit Starmer from the Labour Party is ready to push forward with these regulations.
Tulip Siddiq, the economic secretary to the UK Treasury and City Minister, has stated that stablecoin will not be regulated under the current payment services act. Instead, it will be included in the upcoming regulations that are anticipated to be drafted in early 2025. This approach of tackling everything in a single phase is seen as a more practical and streamlined way of handling the regulations.
The delay in implementing these regulations has caused the crypto industry in the UK to lag behind other European countries and regional organizations like the European Union (EU). The EU, for example, has already put in place the Markets in Crypto-assets (MiCA) regulations to enhance consumer protection and financial stability in the region. Countries like France, Switzerland, and Liechtenstein have also taken steps to regulate cryptocurrency within their borders.
The need for these regulations in the UK has become more pressing as the crypto market in the country continues to grow. Approximately 2.5 million adults in the UK currently own cryptocurrency, representing about 5% of the population. The market size and trading volume have also seen significant increases, reaching around $170 billion and $8.5 billion, respectively. Furthermore, venture capital investments in crypto and blockchain startups have surpassed $1.9 billion in 2022.
In addition to regulating existing cryptocurrencies, the UK is also exploring the possibility of introducing a Central Bank Digital Currency (CBDC) or Digital Pound. The Bank of England is reportedly in the design phase of this initiative and is engaging with industry stakeholders to discuss its implementation.
Overall, the upcoming regulations in the UK are expected to bring clarity and stability to the crypto industry, allowing it to thrive in a regulated environment. By aligning with international standards and best practices, the UK aims to strengthen its position as a hub for crypto innovation and investment.