• Nick Jones, CEO at Zumo


• 13.07.2021 11:45 am
#cryptoassets

Regulation in the crypto industry is a topic we in the UK cannot afford to ignore. Binance, one of the largest cryptocurrency exchanges in the world, is now the subject of a consumer warning from the UK’s Financial Conduct Authority (FCA). Others, such as Wirex, have been forced to suspend onboarding of UK customers altogether while they continue conversations with the regulator. And across the whole wider ecosystem, we are seeing the signs of continued and sustained regulatory scrutiny.

And yet, the sector struggles with confusion and uncertainty. A temporary FCA registration regime for cryptoasset businesses, announced at the end of 2020, targeted ongoing anti-money-laundering and know your customer compliance. This has gradually morphed from registration to isolated regulation, with a ban on crypto derivative products effective from January 2021. In the meantime, a majority of cryptoasset firms operate in regulatory limbo; since the launch of the temporary registration regime, 90% of firms have reportedly withdrawn their applications following FCA intervention. Of those that remain, almost all await final judgement, and the end date for the temporary regime has recently been extended, to March 2022.

This lack of determination and clarity is hurting businesses and consumers alike. For the consumer, the result, as the recent Binance story has shown, is suddenly suspended services, a lack of clarity about which solutions they can trust, and a forced move to more and more obscure offshore providers for those that want to access the full range of crypto services.

For businesses, the struggle is to keep on top of a regulatory framework that remains in flux and awaiting its final verdict. Some, like Celsius, a crypto earning and lending platform with over $15 billion in community assets, have concluded it’s not worth the wait, quietly moving headquarters out of the UK and citing the need for ‘more stability, clarity, and development opportunities to continue expanding our global impact and infrastructure’.

Clearly, though, an opportunity remains. Despite any ongoing regulatory uncertainty, regulation is an important step to cryptocurrency’s mainstream adoption. What’s more, it is still early enough that countries can seize the initiative. Other countries - Singapore, Japan, Switzerland - have drawn up comprehensive and considered regulatory and legislative frameworks. A post-Brexit UK has the same opportunity to get ahead of the curve and construct a proactive and aligned regulatory framework; agreed ‘rules of the game’ that will provide a level playing field for competitors, give clarity and the solid ground on which to build, and a regulatory platform from which to find integration with the wider financial ecosystem and the regulated players within it. And for consumers in an industry that desperately needs to win their trust, the assurance that comes from the ‘trusted provider’ badge. 

This is not about regulation for regulation’s sake; it is about recognising that a clear and considered regulatory framework can provide the platform and conditions for the long-term growth of the cryptocurrency industry. Accordingly, it must be undertaken in consultation with the relevant stakeholders, including CryptoUK, the membership association for the UK cryptoasset industry. The goal must be not to stifle innovation, undermine what makes cryptocurrency unique, nor yet restrict consumer choice, but rather to provide the underpinning that will allow the sector to flourish in the years to come.

Crypto is here to stay; now, in the early days of its journey to mainstream adoption and integration, the opportunity is to regulate in a way that will facilitate growth and give consumers and institutions alike trusted access to a range of new and empowering financial options. Otherwise, we run the very real risk of being left behind in a smart money revolution. 

Based in Edinburgh, Zumo is a non-custodial, decentralised finance platform with the mission of bringing the benefits of blockchain technology and digital currencies to people and businesses everywhere.