The EU has agreed on a landmark crypto law, making it one of the world’s only political institutions to agree on significant regulation of the technology, as the UK and US continue to delay.
The Markets in Crypto-Assets (MiCa) law, which is set to come into effect at the end of next year, is among the world’s first major regulatory frameworks for cryptoassets.
Introduced as an attempt to “put order in the wild west of cryptoassets” according to German lawmaker Stefan Berger, MiCa will require cryptocurrency firms to acquire a licence and introduce customer safeguards to operate in the EU.
While regulators in the UK have been looking to ramp up oversight of the cryptocurrency industry, there is not yet a proper regulatory regime.
The UK investment managers’ trade body, the Investment Association (IA), published a report today calling for the Financial Conduct Authority (FCA) to create a decentralised and digital finance taskforce to both support and regulate the technological advancements in finance.
“With the ever-quickening pace of technological change, the investment management industry, regulator and policymakers must work together to drive forward innovation without delay,” said Chris Cummings, chief executive of the IA.
“Greater innovation will not only boost the overall competitiveness of the UK funds industry, but will improve the cost, efficiency and quality of the investment experience.”
There has been some concern that if the UK lags too far behind, it will be forced to fall in line with the regulatory systems established elsewhere.
UK crypto hopes not ‘dashed’
This fear has been raised about tech regulation more broadly. Andrea Coscelli, the chief executive of the Competition and Markets Authority (CMA), has previously stated that government delays in introducing tech regulation that is distinct from the EU will put the nation at risk of becoming a “rule-taker” from Europe.
However, for some the law from the EU on crypto regulation was agreed too hastily.
“Regulation is essential to make crypto adoption safer for consumers,” said Chirag Patel, CEO of digital wallets at Paysafe.
“While I applaud the EU’s approach to setting out comprehensive regulation, I am also very supportive of the UK’s stance at this time.”
Patel believes that considering both the complexity and nascency of the crypto industry, governments should consider taking more time to implement regulation the right way.
“There are serious risks involved with acting too quickly, given how complex the issues involved are, and rushing essential regulation could ultimately be more harmful to consumers than beneficial,” Patel added.
The EU’s crypto law could also “go too far” and push cryptoasset firms into other jurisdictions in a potential advantage for the UK, one crypto lawyer said.
“Whilst it is clear that the EU‘s work on this subject is well-advanced, this does not mean that the UK’s hopes of being the go-to jurisdiction for cryptoasset firms are dashed,” said Katie Fry-Paul, crypto regulatory expert at law firm Taylor Wessing. “Time spent in reconnaissance is seldom wasted, and the provisional agreement on MiCA may give the UK an opportunity to gauge industry views, and take advantage of its agility to take swift action.”
Introducing cryptocurrencies at an institutional level in the UK was a project announced and championed by the former Chancellor of the Exchequer Rishi Sunak.
Sunak gave a speech in April outlining a plan to make the UK a global cryptoasset hub. However, since Sunak’s resignation as chancellor earlier this week, it is unclear what will become of the plan.