Britain: A global hub for cryptoassets

A recent announcement from HM Treasury means the Government will recognise stablecoins as a valid form of payment. Part of wider plans to make Britain a global hub for cryptoassets, encouraging investment in the UK in latest technologies.

Does this mean cryptoassets be legal tender?

This announcement will pave the way for upcoming regulation to allow use of stablecoins to be used as a recognised payment method within the UK. Measures announced include: legislating for a ‘financial market infrastructure sandbox’ to help firms innovate, an FCA-led ‘CryptoSprint’, working with the Royal Mint on an NFT, and an engagement group to work more closely with industry.

What are Stablecoins?

Stablecoins are a form of cryptoasset, that are typically pegged to a fiat currency such as the dollar. Which are intended to maintain a stable value. With appropriate regulation, they could provide a more efficient means of payment and widen consumer choice.

Aiming to be at the forefront of financial innovation

The overall package of measures aim is to ensure the UK financial services sector remains at the cutting edge of technology. Which in turn attracts investment and jobs and widening consumer choice. It includes:

  • introducing a ‘financial market infrastructure sandbox’ to enable firms to experiment and innovate,
  • establishing a Cryptoasset Engagement Group to work more closely with the industry,
  • exploring ways of enhancing the competitiveness of the UK tax system. This is to encourage further development of the cryptoasset market,
  • Finally, working with the Royal Mint on a Non-Fungible Token (NFT) this summer as an emblem of the forward-looking approach the UK is determined to take

Chancellor of the Exchequer, Rishi Sunak said:

“It’s my ambition to make the UK a global hub for cryptoasset technology. The measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country.” Then said: “We want to see the businesses of tomorrow – and the jobs they create – here in the UK” Then added: “by regulating effectively we can give them the confidence they need to think and invest long-term.”

He then went onto say: “This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation”.

Why legislation now?

The government intends to legislate to bring stablecoins – where used as a means of payment – within the payment’s regulatory perimeter. This creating conditions for stablecoins issuers and service providers to operate and invest in the UK. By recognising the potential of this technology and regulating it now, the government can ensure financial stability. As well as the high regulatory standards. This means that these new technologies can ultimately be used both reliably and safely.

So, what happens now?

The UK’s vision for being a global hub for cryptoasset technology was set out in a speech by the Economic Secretary to the Treasury, John Glen at the Innovate Finance Global Summit last week.

He also announced that the UK will proactively explore the potentially transformative benefits of Distributed Ledger Technology (DLT), in UK financial markets. This enables data to be synchronized and shared in a decentralised way to potentially achieve greater efficiency, transparency and resilience.

Further development

The UK government will explore ways of enhancing the competitiveness of the UK tax system. This is to encourage further development of the cryptoasset market in the UK. It will review how DeFi loans (where holders of cryptoassets lend them out for a return) are treated for tax purposes. The government will also consult on extending the scope of the Investment Manager Exemption to include cryptoassets.

The Chancellor has commissioned the Royal Mint to create a Non-Fungible Token this summer.

The Financial Conduct Authority will hold a two day ‘CryptoSprint’ in May with industry participants. Seeking views directly from industry on key issues relating to the development of a future cryptoasset regime.

The Economic Secretary will establish and chair a Cryptoasset Engagement Group. Convening key figures from the regulatory authorities and industry to advise the government on issues facing the cryptoasset sector.

In his Mansion House speech in July 2021, the Chancellor set out his vision for the future of the financial services sector. This included a plan to ensure that the UK remains at the forefront of technology and innovation. This was one of four key components of that vision. Which has the ultimate aim of building the financial services sector. Additionally, one that continues to be one the rest of the world looks towards.

For more information around Cryptoassets please do not hesitate to contact us here at Starbox accountants.

Mason King