The United Kingdom: A Hidden Gem in Cryptocurrency Regulation
While conventional wisdom may lead one to believe that the UK is a relatively small player in global cryptocurrency markets compared to giants like China and the United States, a closer look reveals several overlooked advantages. In this article, we’ll delve into why the UK is an attractive destination for cryptocurrency companies looking to expand their reach.
A Global Financial Hub
London’s position as a leading global financial hub means that UK regulation has a significant influence on markets worldwide. When selling fungible, transferable tokens from any country, observance of UK financial promotion rules is now non-negotiable if the communication can affect the UK. This has far-reaching implications for cryptocurrency companies operating globally.
Regulatory Superpowers
The UK’s regulatory framework is robust and internationally recognized. A breach of UK rules can result in up to two years’ imprisonment and an unlimited fine. The Financial Conduct Authority (FCA) has recently published guidance emphasizing its growing interest in ensuring that the UK’s rules are complied with. Firms providing on/off-ramp services to crypto firms engaging in illicit activities risk losing their banking and payment rails.
Growing Regulatory Clarity
As regulatory clarity increases, it makes sense for cryptocurrency companies to adopt a risk-based approach when entering new markets and collaborating with ethical third parties to scale their ventures. The Markets in Crypto-Assets (MiCA) regulation creates challenges and opportunities that can be approached from a stronger position than many think when based outside the EU.
EU Member States: A Patchwork of Regulations
Although MiCA is intended as a single regime, experience shows that different EU countries will seek to position themselves as the ‘go-to jurisdiction.’ In reality, there are likely to be only a few winners. We’re already seeing divergence between EU member states regarding taxes imposed on crypto firms, ease of interacting with existing infrastructure, and leveraging pre-existing licenses.
Choosing the Best Jurisdiction
Non-EU cryptocurrency companies can choose the most suitable jurisdiction for their operations. This requires careful consideration, as advisers in each jurisdiction will attempt to sell themselves. The cost differences can be substantial, and companies are using strategic solutions to reduce EU access costs by up to 90%.
The Cost of Compliance
While compliance with MiCA can be costly, it’s not insurmountable. Companies are looking to headquarter their corporate group in the UK due to its deep network of legal and financial services, world-class universities, and regulatory influence.
UK Regulatory Leadership
Regulators worldwide are interested in the UK’s position when drafting frameworks for cryptocurrency regulation. The outcome of the European Securities and Markets Authority’s guidance on reverse solicitation under MiCA is similar to the UK’s financial promotion rules. Collaboration among regulators has led to common minimum global standards.
A UK-First Approach
Companies that prioritize a UK-first approach benefit from an established and robust legal framework recognized internationally. This provides a solid foundation for regulating crypto asset businesses, setting out requirements for other jurisdictions.
Conclusion
The UK offers several overlooked advantages in cryptocurrency regulation, making it an attractive destination for companies looking to expand their reach. By understanding the regulatory landscape and adopting a risk-based approach, companies can navigate the complexities of MiCA and capitalize on the benefits of being based in the UK.
Pavan Kaur is a partner at Gunnercooke, serving as a fractional chief marketing officer to crypto companies. Pavan is also a GTM strategy expert for Outlier Ventures’ accelerator programs.
This article is for general information purposes only and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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