A Review of Crypto Regulations in the UK Amid Economic Downturn

Crypto Regulations With the FCA

Several major developments have come out of the United Kingdom lately, including Liz Truss becoming the 56th Prime Minister of the UK and the demise of Queen Elizabeth II. While there is a lot going on in the social and political realm in the UK, many eyes will be on how the crypto regulations proceed in the country.

The Financial Conduct Authority (FCA) is the AML/KYC regulator of UK crypto businesses. The FCA stated in a press release published in October 2019 that businesses dealing with cryptocurrencies must comply with the same anti-money laundering requirements as banks and financial services.

“Our supervisory approach to crypto asset businesses will be in line with our approach to other businesses under the money laundering rules (MLRs),” FCA states in the press release update of May 2022.

The UK crypto regulations currently match EU requirements specified in the 5AMLD and 6AMLD directives. FCA had previously set a deadline of March 31, 2022, for crypto firms to register themselves and become compliant with money laundering regulations. However, FCA later extended the deadline for a few selected firms.

Making the UK a Global Crypto Hub

The UK government stated in a press release on April 4 that they are taking steps towards making the UK a global crypto hub. Former Chancellor of the Exchequer, Rishi Sunak remarked:

“It’s my ambition to make the UK a global hub for crypto asset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country.”

The UK government will explore ways to make the UK tax system more competitive to facilitate further development of the crypto asset market. The tax system will examine DeFi loans, in which crypto assets are lent out for a return.

In addition, two UK crypto bills will be proposed, looking to reduce “red-tape”, maintain financial standards, and recover illicit crypto assets:

• The Financial Services and Markets Bill
• The Economic Crime and Corporate Transparency Bill

The first bill seeks to harness financial services opportunities from innovative technologies and facilitate the safe adoption of cryptocurrencies. By contrast, the latter simplifies the process of seizing and recovering crypto assets, which are the primary means through which ransomware attackers operate.

Another new bill to regulate stablecoins is scheduled to be debated in Parliament for the first time in September. In the midst of a complex legislative process, crypto advocates await regulators' interpretations and enforcement of the legislation.

Impact of the New PM

Liz Truss became the 56th Prime Minister of the United Kingdom and Northern Ireland on Sept. 5.

Truss will look to solve the U.K.'s current economic woes, especially the high cost of living, after replacing Boris Johnson. During her tenure as chief secretary to the Treasury in 2018, Truss expressed optimism about cryptocurrencies:

Since then, Truss hasn't made any specific recommendations or comments regarding cryptocurrencies or blockchains. There will be a lot riding on Kwasi Kwarteng, the new Chancellor of the Exchequer, regarding crypto regulations in the U.K.

However, in a 2021 report from Kwarteng's previous department for Business, Energy, and Industrial Strategy, blockchain solutions were identified as key to transforming the British economy.