The U.K. has taken a piecemeal approach to crypto regulation. One such move was the ban on the sale of
cryptocurrency derivatives and exchange-traded notes to retail investors. It’s an example where things don’t go as well as they could.

(3:16) “And I think a lot of people in the industry in relation to that ban were a little bit disappointed that it kind of came across more as a knee-jerk reaction to the space and some of the developments in the market rather than a more considered and proportionate approach, which I think we would all advocate for when it comes to regulating our space,” said Chris.

The U.K. is taking a slightly different tack than its European neighbors with MiCA, which is a sweeping attempt to govern nearly all aspects of crypto assets that aren’t already sitting within the current rules. There are some merits to this approach, as it brings harmonization, at least potentially, and it gives businesses looking to operate and unlock that market some certainty about operating in the region. For example, if they are authorized or are conducting themselves in accordance with the regulations in one member state, then they are able to roll out their products and access customers throughout all EU member states.

There are equally some onerous components as well, said Chris, pointing to stablecoins as an example because they will face a great deal of scrutiny and administrative burdens in the event that MiCA is brought into force as is.

(5:01) “Looking at it from the UK perspective, and the idea that they are at least purporting to take a more nuanced approach, that does have some advantages because it isn’t a one size fits all policy. It allows them perhaps to be a little bit more receptive to specific circumstances and certain nuances into how our sector develops,” said Chris.

The U.K. has been relatively forward-thinking in that there is a well-defined regulatory parameter for how these assets are actually dealt with from a regulatory perspective. The FCA has been quite proactive in implementing some clear guidance for firms, and it is more nuanced than some other jurisdictions.

(6:02) “I think more generally there’s an expression, at least in principle, of a desire for the regulation to be proportionate and to be forward-thinking and proactive rather than reactive,” said Chris.

A consultation is currently underway about stablecoins and whether or not there should essentially be a new category added for them to sit alongside the existing three categories in the U.K., which are security tokens, payment/money tokens, and unregulated tokens, which is the bucket that catches just about everything else, said Chris.

(7:09) “On balance, there have been some elements that are a little bit more reactive and that ban of the sale of crypto derivatives and ETNs to retail investors is one of them…But then I think perhaps there is an acknowledgment that a more sensitive approach perhaps is starting to trickle down through government and also will have an effect as to how the FCA actually develops its approach for the next 12-18 months,” said Chris.