Rishi Sunak was the finance minister and a fervent supporter of cryptocurrencies and blockchain technology.
Now that he is the prime minister, he could give the sector a boost at a time when it desperately needs good news because the value of digital assets has fallen.
There are many ways he could accomplish this, and providing regulatory clarity is one of the most popular demands from cryptocurrency businesses and investors.
British cryptocurrency businesses and investors are very optimistic that the new prime minister, Rishi Sunak, will revive Britain’s flagging crypto ambitions.
The new leader of the United Kingdom, who served as finance minister under former Prime Minister Boris Johnson, has a long list of tasks to complete, including undoing the damage Liz Truss’ administration caused to the economy. Although cryptocurrency isn’t exactly at the top of his list of priorities, experts in the field believe there is cause for optimism.
Entrepreneurs are feeling relieved, according to Christian Faes, co-founder of the digital lending start-up LendInvest. After Liz Truss and [ex-Finance Minister] Kwasi Kwarteng’s arrogance and incompetence nearly caused the U.K. economy to crash, there is a sense that we have someone sensible in Number 10.
Faes, who also serves as chair of the Fintech Founders network, continued, “Rishi recognises the opportunity and potential that cryptocurrency has and wants the U.K. to be a leader in it.
Former Goldman Sachs analyst Sunak has frequently expressed support for cryptocurrencies. He laid out a comprehensive plan to turn Britain into a major crypto hub in April while serving as the minister in charge of the nation’s finances. This included convincing the Royal Mint, the official coin manufacturer of the United Kingdom, to introduce a nonfungible token and bringing stablecoins within the legal framework.
In June, Sunak declared he was “determined” to make the U.K. “the jurisdiction of choice for crypto and blockchain technology” at a cocktail party hosted by the venture capital firm Index Ventures.
However, following weeks of political unrest, cryptocurrency companies and investors are unsure of what he will do to revive the market, which is still licking its wounds from a punishing few months for the price of digital assets and a wave of corporate failures.
Uncharacteristically disorganized
There had been a decline in confidence in the U.K.’s position in the international crypto market prior to Sunak’s appointment as PM.
Only 9% of the 300 British fintech founders polled said they were leading the way in cryptocurrency. According to a survey by Fintech Founders, almost 20% of founders believed the regulator was “actively signalling” that the U.K. wasn’t the best place to launch a cryptocurrency business.
The Financial Conduct Authority has come under fire for taking too long to grant licences to cryptocurrency businesses, a problem that has led to the closure of several businesses and the establishment of new ones in other parts of Europe. After numerous extensions to the deadline for final approvals, the fintech app Revolut only recently obtained a licence for its cryptocurrency entity.
According to the FCA, a significant portion of applicants failed to adhere to its standards for combating money laundering.
Matteo Perruccio, president of international at cryptocurrency-focused fund manager Wave Financial, told CNBC, “I find that sadly this is yet another example of the U.K. acting very uncharacteristically disorganised.”
In contrast, Perruccio cited Switzerland as an example of a nation that has been “brilliant” in luring crypto exchange-traded products, or ETPs, among other products.
Nevertheless, there is a sizable cryptocurrency market in the U.K. From July 2021 to June 2022, $233 billion in digital assets were traded, according to data from Chainalysis. However, it didn’t expand as much as Germany, where on-chain activity increased by 47% from the previous year.
Cryptocurrency may be a way for London to increase its chances as it seeks to compete with other EU financial hubs after Brexit, according to insiders in the sector.
According to Jordan Wain, U.K. public policy lead at Chainalysis, “there is an opportunity to provide clarity to the industry and allow it to play its role in achieving its mandate to encourage businesses to invest, to innovate, and to create jobs in the U.K.
What could he do?
Sunak might try to align various U.K. efforts made by regulators to monitor cryptocurrency, something that U.S. President Joe Biden has advocated for.
While the British government has not closed the door to digital currencies, independent regulators’ officials have been more critical of the industry.
Sunak could also promote cryptocurrency in the UK. is by advancing the exploration of a central bank digital currency by the Bank of England.
A taskforce led by Sunak’s finance division and the central bank was established in April 2021 to investigate the viability of a token accepted as a substitute for the British pound. It has been given the name “Britcoin,” despite the fact that it most likely wouldn’t resemble the volatile and decentralised cryptocurrency bitcoin.
Varun Paul, market infrastructure director at crypto software company Fireblocks, told CNBC that there may now be an acceleration in the work being done on those proposals.
Other central banks, including the Federal Reserve and the European Central Bank, are thinking about creating their own digital currencies. China, however, is ahead in the CBDC race, with a number of its provinces already actively testing a digital version of the yuan.
Crypto investors are most eager to see Sunak provide the market with some clarity. The American government released a cryptography framework. Additionally, the European Union has approved a comprehensive set of laws to regulate the industry.
The Financial Services and Markets Bill in the United Kingdom aims to increase the financial sector’s competitiveness after Brexit. Once passed, it would recognise crypto assets as regulated products and is currently making its way through the legislative process.
With [Sunak] leading the charge, “one would expect the path to regulatory clarity to be significantly shorter,” wrote Martin Hiesboeck, head of blockchain and cryptocurrency research at trading platform Uphold, in an email.
