The UK must be cautious when introducing strict cryptocurrency regulation and consider the effects on the industry as a whole, says Lanistar

The UK cryptocurrency regulation saga continues, with UK Members of Parliament recently likening crypto investment to gambling. Cryptocurrency and digital currencies have been on the political radar for some time now, and regulation is likely on the horizon. In October 2022, the House of Commons approved the Financial Services and Markets Bill recognising cryptocurrencies as regulated financial instruments, but this has yet to pass through the House of Lords. 

The FinTech industry has grown significantly in recent years and is estimated to reach $1.5 trillion in annual revenue by 2030, with crypto transactions set to account for a considerable portion of this growth. Cryptocurrencies provide significant value to FinTech’s helping unbanked people access alternative financial services. With traditional money transfers often plagued by inefficiencies and delays, cryptocurrencies move quicker than traditional currencies to reach those who need it, faster. 

Given the flexible and autonomous nature of the cryptocurrency landscape, disproportionate regulation may hamper the industry, which has so far thrived through flexible fundraising models. This has enabled organisations to raise funds at faster rates, with retail investors benefiting by having access to a wider range of investment opportunities and inflation protection, meaning digital currency value is not affected by the UK’s recent inflation woes. 

Jeremy Baber, CEO of Lanistar, said: “There is undoubtedly a need for regulation with regard to digital currencies, but the UK Government must consider the effects on the crypto industry overall. Overly harsh and unnecessary policy that is a result of a fundamental misunderstanding of crypto and its long-term technological benefits, will hamper innovation and could destroy this innovative and far-reaching system, and in turn could ultimately leave many people out of pocket.  Regulations that aren’t thought out or are implemented without expert guidance would hamper the progress of legitimate projects and could be harmful.  We support regulation but recommend it is considered with the consultation of experts in the field.”

While rigid rules are likely to harm the industry, Baber believes that regulation is needed and would benefit the UK to help identify any bad players that are manipulating cryptosystems.

Baber continued: “Although there have been claims that crypto is akin to gambling, the same could be said of the traditional stock market investments – consumers can lose all their investment there too.  It’s no secret that the industry is sometimes the target of criminals, so targeted regulation that is measured and proportionate would create a safer environment for investors that wish to enter the crypto space. Focusing on pyramid schemes and anti-money laundering activities must be the priority.  Now is the time to take a considerate approach to what the future of cryptocurrency looks like, to enable legitimate projects to flourish.”

Baber concluded: “The UK needs to be seen as the financial powerhouse and crypto is here to stay so we need to embrace it while protecting consumers.  It is clear that there is a need for regulations across the crypto industry in the UK but likening the industry to gambling is incorrect and unfair. Nevertheless, when introducing planned regulations, the UK Government must consider the potentially damaging effects on the FinTech industry. Appropriate regulations are needed to crack down on any criminal activity in the space, but highly restrictive regulations could greatly affect momentum across FinTech innovation.”