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Written evidence submitted by the UK Cryptoasset Business Council (UKCBC)

 

The UK Cryptoasset Business Council (UKCBC)

The UKCBC represents the political interests of the UK’s crypto-economy. It brings together select business leaders in the sector to educate Westminster and Whitehall and help identify and shape policy pathways to ensure the UK becomes a global crypto hub.

 

Context

The UK’s crypto economy stands on the cusp of great change. Reports coming from inside HM Treasury indicate that the crypto asset regulatory perimeter will begin a process of reform later this year. But exactly what shape this takes remains to be seen.

 

In April, the then Chancellor announced his ambition to “make the UK a global hub for cryptoasset technology and investment”. This was met with a wave of enthusiasm throughout the entire global crypto-economy.

 

Early signs from the new Government are positive. With Richard Fuller MP, a current Treasury Minister affirming the UK’s wish to be the “dominant global hub for crypto technologies (…) to become the country of choice for those looking to create, innovate and build in the crypto space”.

 

The UK is well placed to capitalise on this opportunity and become the centre of the global crypto- economy. We have deep roots in financial markets, a revered legal framework, and deep pools of talent – combined with the regulatory and legislative freedoms Brexit has afforded us.

 

Get this right and the crypto-economy will play a game-changing role in helping the UK prosper – helping to kickstart a wave of growth, innovation and ensure a future-proofed jobs market. A recent report by PWC found that blockchain technology has the potential to boost global GDP by more than

£1.5trn over the next decade and could deliver around 40 million jobs globally.

 

However, get this wrong and we will lose out in the global tech race. There is currently only one tech firm in the FTSE100. We need to incubate, accelerate, and attract the companies of tomorrow.

 

Currently, the wider sector trends in the UK are concerning. The flow of venture capital invested in London’s crypto asset firms is going in the wrong direction, with companies reporting almost a 70% reduction in venture capital deals between 2021- 2022. Meanwhile, global deals more than doubled to

£4.08 billion.

 

Additionally, recent signals coming out of Treasury do not provide assurances or landscape clarity. The Financial Service & Markets Bill aims to introduce new secondary objectives on the FCA and PRA to foster ‘growth’ and ‘international competitiveness’. Theoretically, this is a positive step, and it could turbocharge the UK crypto-economy in a global context. Yet, how it translates into reality and the interaction between primary and these secondary objectives remains ambiguous.

 

It will not be achieved, however, by weakening our world-class regulatory standards. On the contrary, a reduction in standards would not afford sustainable economic growth and it would undermine international confidence in our system and the very firms within it. A structure must be implemented to help balance these, at times, opposing objectives.

 

Principles to Inform Policy

It is vital that policy makers develop a coherent vision, strategy and timetable for delivery of reforms to the UK’s crypto-economy. The UK Cryptoasset Business Council has outlined six overarching principles that underpin its objectives and are critical to the advancement of a measured and supportive

 


 

 

 

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operating ecosystem. It is critical policy and decision makers consider these as part of the UK’s future

regulatory framework.

 

  1. Engine room for growth: Cryptoassets can turbocharge the economy and deliver a high growth agenda by reducing costs, streamlining cross-border payments, accelerating transactions, and fostering financial inclusion. This will deliver a global cryptoasset hub and ensure that the crypto-economy plays a forward role in ongoing discussion around the future of the UK’s financial services sector, in a post-Covid landscape. The UKCBC advocates for a permanent regulatory framework that can help promote growth and respond effectively to the rapid pace of evolution in the crypto-economy.

 

  1. Global Britain: Brexit has left the UK free to forge its own regulatory path and be nimble in its approach. The UK should therefore look to leverage a global competitive advantage and introduce policies that help the UK become the country of choice for firms looking to construct, innovate and develop in the crypto-economy. The UKCBC advocates policies that ensure the UK is a welcoming place for the global crypto-economy so that we can attract capital investment, repatriate the UK’s crypto-economy, create new jobs, accrue benefits from tax revenues and create a whole wave of ground-breaking products and services that will kickstart a digital revolution. Additionally, policy and decision makers should draw lessons from the regimes that have been developed in other jurisdictions, such as Dubai and Switzerland and take account of current and emerging global standards and norms.

 

  1. Innovation friendly: The rise of cryptoassets will help pave the way for technological innovation. Emergent technologies, from DeFi to NFTs necessities the need for an adaptable framework that can incorporate evolving products and offerings. Cryptoassets will help put the UK at the front of the global innovation race. Yet, to date several leading cryptoasset firms have left the UK due to a perceived hostile environment. There is currently one tech firm in the FTSE100. We need to incubate and attract the companies of tomorrow. The UK should foster a positive framework and environment that will encourage these companies to return home and help onshore jobs, investment, and tax take. The UKCBC advocates for an innovation first approach, like that in the AI and ML sectors, that promotes the potential of technology. Ensuring the right rules as part of a measured framework would provide a safe space for innovation.

 

  1. Productivity puzzle: Cryptoassets decrease the number of inputs needed to derive the same outputs. They will help deliver lasting productivity improvements throughout the economy and help reverse the deeply embedded productivity crisis that is holding the UK back. Policymakers should therefore develop a regime that enables a wide spectrum of new opportunities that can help solve the UK’s productivity puzzle.

 

  1. Future proof the UK job market: The UK population must be adequately equipped to adapt not only to new jobs but entirely new fields. The workers of tomorrow must be trained with the correct skillset today to reflect the rapidly changing technological landscape. A digitally literate population is essential to the crypto economy to help firms scale and develop their offerings. The UKCBC advocates policies that equip the youth of today with the skills of tomorrow. Furthermore, the government should assess whether existing visas are achieving the desired outcomes and supporting the sector’s development.

 

  1. Ensuring high levels of consumer protection: A holistic strategy for consumer protection and ensuring market integrity are critical for the longevity of the sector. Weakening our world-class regulatory standards is not the answer. It doesn’t have to mean a race to the


 

 

 

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bottom. On the contrary, a reduction in standards would not afford sustainable economic growth and it would undermine international confidence in our system and the very firms within it. It is vital a structure is implemented to help balance these, at times, opposing objectives.

 

October 2022