The United Kingdom is starting to weigh the benefits of creating new regulations for Bitcoin and other cryptocurrencies. Currently, the UK’s Financial Conduct Authority (FCA) regulates a handful of crypto assets but not Bitcoin or most of the other major digital currencies. Legislators cite the need for improved consumer/investor protections, but their greatest hope seems to be that the UK could become a hot spot for new blockchain companies. This hope is particularly as the UK prepares for a “hard Brexit” and the economic uncertainties that it will bring. A crypto bull run in 2019 could be a boon for the nation if handled correctly.
There are many ways that the UK could approach new Bitcoin regulation. The most obvious factor worthy of consideration is the Initial Coin Offering (ICO), the fundraising tool that had thousands buying Bitcoin. As most of our readers know, during the past three years, numerous ICOs have raised billions, though many of the technology companies behind these ICOs have unfortunately failed to deliver working products. As these funds were raised from private investors without the ICO company having to go through regulated fundraising channels, this is the first blockchain practice that is likely to see new regulatory strictures in the coming months.
This argument is not without its merits. If you regularly invest in ICOs, you have probably lost some money in the past year. While regulations wouldn’t necessarily prevent market crashes, they could do a great deal to prevent bad actors from using the ICO markets as slush funds, and to encourage investors do their due diligence before investing more than they could afford to lose.
Could the UK Become a Hotbed For Crypto Innovation?
There are many different countries trying to attract the business of innovative blockchain companies. The United Arab Emirates, Malta and Cyprus all come to mind. These countries typically make their play by creating very friendly regulations, and by lowering business tax rates to the point where blockchain companies would pay very little to reside within the state.
Britain has been considering the possibility of operating as a kind of tax haven as Brexit approaches. Lowering its corporate tax rates could increase business activity within the country, and the addition of new blockchain regulations could become part of this plan, should it be put into effect.
However, it’s unlikely that the UK could ever lower tax rates enough or create regulations sufficiently lax, to create an environment more generous than that of small countries like Cyprus. What may work in the UK’s favor is its much larger size, greater fintech presence and far superior economic fundamentals than are available elsewhere.
Whatever the case, it seems likely that UK will follow suit with the rest of the world and further regulate cryptocurrency. Whether or not this will be good for the space is yet to be seen.
Featured image: “Bank of England Bitcoin” – Numismatic Bibliomania Society (NBS) via Flickr (CC BY-SA 2.0)