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As Europe prepares to implement the Markets in Crypto-Assets Regulation (MiCA), industry insiders are divided on whether the United Kingdom presents a viable alternative for crypto firms seeking relief from the stringent European framework. While some executives foresee a potential shift from the EU to the UK, others express concerns over the UK’s regulatory uncertainty.
Sophie Bowler, Chief Compliance Officer at UK-based Zodia Custody, suggested that MiCA’s demands could lead to a “short-term shift” of companies from the EU to the UK. “For firms unable or unwilling to meet MiCA’s requirements, there may be a temporary move to the UK market,” Bowler stated in Chainalysis’ 2024 Geography of Cryptocurrency Report.
However, executives from UK crypto organizations, including CryptoUK and Merkle Science, caution that the UK may not offer the regulatory clarity needed to attract businesses looking to avoid MiCA.
Unpredictability in the UK’s Crypto Regulation Approach
Natalia Latka, Director of Public Policy and Regulatory Affairs at Merkle Science, pointed out the challenges posed by MiCA’s complex requirements for crypto asset service providers (CASPs) and stablecoin issuers. “The cost and complexity of complying with MiCA may push some companies to consider relocating, which could diminish the ‘Brussels effect’ of EU regulation,” Latka explained.
Nevertheless, she noted that the UK may not provide the level of certainty that businesses expect. “The UK, though seemingly a nearby alternative, also presents challenges. Its phased regulatory approach introduces unpredictability, especially with the lengthy registration process overseen by the Financial Conduct Authority (FCA),” Latka added.
A Jurisdiction with Less Clarity?
Su Carpenter, Executive Director of CryptoUK, echoed similar concerns, citing delays in the UK’s regulatory progress due to the recent general election and the government change in July 2024. She emphasized that although the UK made significant strides in consultations during late 2023 and early 2024, further regulatory implementation has yet to materialize.
“There has been no clear direction from the new Labour government regarding their stance on the digital asset sector,” Carpenter stated. She expressed surprise at the notion of businesses moving to the UK amidst such uncertainty, given the costs and resources required to make that shift.
While the UK’s regulatory approach is not expected to fully replicate MiCA, Carpenter pointed out that it will need to evolve as the crypto industry continues to develop. She also highlighted that MiCA’s introduction presents an opportunity for the UK government to position itself as a more favorable regulatory environment for companies seeking an alternative to the EU.
Cautious Optimism for the UK’s Crypto Framework
As Europe’s MiCA framework takes shape, the UK faces both challenges and opportunities in attracting crypto businesses. While some firms may consider the UK as a potential haven, regulatory clarity and predictability remain critical issues. Whether the UK can capitalize on MiCA’s burdens and offer a more hospitable environment will depend on how quickly and effectively it addresses these concerns.
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