The Overlooked Regulatory Superpowers of the UK

As we navigate the emerging regulatory landscape for cryptocurrencies, it’s essential to recognize that conventional wisdom doesn’t always apply. The United Kingdom, outside of the European Union economic bloc, is often perceived as a smaller market compared to China and the United States. However, when it comes to cryptocurrency markets, the rules are far from set, and the UK has several overlooked advantages relative to other markets.

Global Financial Hub

London’s leading position as a global financial hub gives UK regulation significant global influence. It is now non-negotiable for any country selling a fungible, transferable token that observance of UK financial promotion rules is required if the communication can affect the UK. This means that companies selling tokens to UK-based investors must comply with UK regulations.

UK Regulatory Superpowers

The UK’s regulatory framework has several powerful features:

• A breach of the UK rules can result in up to two years imprisonment and an unlimited fine.
• The Financial Conduct Authority (FCA) has recently published guidance that firms providing on/off-ramp services to crypto firms conducting illegitimate activities could themselves be committing an offense or facilitating an offense. Firms breaching the FCA rules risk losing their banking and payment rails.
• Marketing materials that purport to promote investment activity in a token must be created to comply with or fall out of the regulatory scope of the UK Financial Promotions regime.

Growing Regulatory Clarity

As regulatory clarity grows, it makes sense for cryptocurrency companies to take a risk-based approach when entering a new market and engaging with ethical third parties to scale their ventures. For companies looking to expand into the EU, the Markets in Crypto-Assets (MiCA) regulation creates several challenges and opportunities that can be approached from a stronger position than many think.

EU Member States

Experience shows that different EU countries will seek to position themselves as the ‘go-to jurisdiction.’ In practice, there are only likely to be a couple of winners. We are already seeing some divergence between EU member states in this respect:

• Taxes: Different levels of taxes imposed on crypto firms
• Ease of interaction with existing infrastructure: The ease with which firms can interact with existing infrastructure to sell products varies across countries.
• Pre-existing licenses: The ability to leverage pre-existing licenses to reduce the cost of going to market also plays a role.

Cost of Compliance

The cost of compliance with MiCA can be minimized, and companies are looking to headquarter their corporate group in the UK. This is due to its deep network of legal and financial services, world-class universities, and regulatory impact.

UK-First Approach

Companies that take a UK-first approach to their products benefit from an established and robust legal framework internationally recognized by other jurisdictions. Businesses and investors would do well to consider these all-too-often overlooked regulatory advantages that being based in the UK offers when planning for the future.

Conclusion

In conclusion, while conventional wisdom may suggest that the UK is a smaller market compared to China and the United States, it has several overlooked advantages relative to other markets. By taking a risk-based approach, engaging with ethical third parties, and considering the regulatory advantages of being based in the UK, companies can seize opportunities in the emerging regulatory landscape.

About the Author

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.

Disclaimer

This article is for general information purposes and is not intended to be 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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This article aims to provide a comprehensive understanding of the UK’s position in the cryptocurrency market, highlighting its regulatory advantages and the benefits of taking a UK-first approach. The author, Pavan Kaur, emphasizes the importance of considering these factors when planning for the future.