Opinion: The UK’s Regulatory Advantage in Cryptocurrency Markets
As the cryptocurrency market continues to grow and evolve, conventional wisdom might lead one to believe that the United Kingdom is at a disadvantage compared to larger markets like China and the United States. However, this perspective overlooks several key advantages that the UK has in regulating cryptocurrency markets.
Global Financial Hub
London’s position as a global financial hub gives the UK significant influence over global regulation. In fact, it’s now non-negotiable for companies selling fungible, transferable tokens to comply with UK financial promotion rules, regardless of their location. Failure to do so can result in severe penalties, including up to two years’ imprisonment and an unlimited fine.
UK Regulatory Superpowers
The Financial Conduct Authority (FCA) has recently published guidance that highlights the growing interest in taking action against companies facilitating illicit activities through on/off-ramp services. Firms breaching FCA rules risk losing their banking and payment rails, making it essential for companies to comply with UK regulations.
Marketing materials promoting investment activity in tokens must be created to comply with or fall out of the regulatory scope of the UK Financial Promotions regime. This means that companies operating in the cryptocurrency space need to ensure they are familiar with and adhering to UK regulations.
Growing Regulatory Clarity
As regulatory clarity grows, it’s essential for companies to take a risk-based approach when entering new markets and engaging with ethical third parties to scale their ventures. The Markets in Crypto-Assets (MiCA) regulation creates several challenges and opportunities that can be approached from a stronger position than many think when based outside the EU.
Although MiCA is designed as a single regime, experience has shown that different EU countries will seek to position themselves as the "go-to jurisdiction." In practice, there are only likely to be a couple of winners. We’re already seeing some divergence between EU member states in terms of taxes imposed on crypto firms and the ease with which firms can interact with existing infrastructure to sell products.
EU Member States: Opportunities for Non-EU Companies
This divergence creates opportunities for non-EU companies to choose the best jurisdiction based on their specific needs. However, this requires careful consideration, as advisers in each jurisdiction will seek to sell themselves. The cost differences can be substantial, and companies are looking at strategic solutions to reduce EU access costs by up to 90%.
The Cost of Compliance
Given the cost of compliance with MiCA can be minimized, companies are considering headingquartering their corporate group in the UK thanks to its deep network of legal and financial services, world-class universities, and regulatory impact. While Web3 natives may not see the UK as market-leading due to English law being used for international business deals, regulators are interested in the UK’s position in drafting frameworks.
Collaboration Among Regulators
It’s worth noting that the outcome of the European Securities and Markets Authority’s guidance on reverse solicitation provided under MiCA leads to a similar outcome as the UK financial promotion rules. We’ve also seen collaboration among regulators to set common minimum global standards, highlighting the importance of the UK regulatory position.
UK-First Approach: Benefits for Businesses
Companies that take a UK-first approach to their products benefit from an established and robust legal framework internationally recognized by other jurisdictions. This sets out requirements for regulating crypto asset businesses, making it easier for companies to comply with regulations in multiple jurisdictions.
Businesses and investors would do well to consider these all-too-often overlooked regulatory advantages that being based in the UK offers when planning for the future.
Conclusion
The UK’s regulatory advantage in cryptocurrency markets is often overlooked but should not be underestimated. With its global influence, robust legal framework, and growing interest from regulators worldwide, companies operating in this space would do well to consider a UK-first approach. By doing so, they can benefit from reduced compliance costs, improved access to international markets, and a more stable regulatory environment.
About the Author
Pavan Kaur is a partner at Gunnercooke, serving as a fractional chief marketing officer to crypto companies. Pavan is also a GTM strategy expert for Outlier Ventures’ accelerator programs.
Disclaimer
This article is for general information purposes only and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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