As the cryptocurrency market continues to evolve, traditional wisdom would suggest that the United Kingdom is at a disadvantage compared to larger markets such as China and the United States. However, in the world of cryptocurrencies, the rules are far from set, and the UK has several overlooked and misunderstood advantages relative to other markets.
Global Financial Hub
London’s position as a global financial hub gives the UK a significant influence on global regulation. The UK’s regulatory framework is now non-negotiable when it comes to selling fungible, transferable tokens from any country that can affect the UK. This means that companies looking to expand into new markets must consider the UK’s regulations.
UK Regulatory Superpowers
The Financial Conduct Authority (FCA) has recently published guidance on the regulation of crypto firms conducting illegitimate activities. Firms providing on/off-ramp services to such companies risk committing an offense or facilitating one. The consequences of breaching UK rules are severe, with up to two years’ imprisonment and an unlimited fine.
Furthermore, marketing materials that purport to promote investment activity in a token must comply with the UK Financial Promotions regime. This means that companies looking to expand into new markets must ensure their marketing materials meet these regulations.
Growing Regulatory Clarity
As regulatory clarity grows, it makes sense for cryptocurrency companies to take a risk-based approach when entering new markets and engaging with ethical third parties to scale their ventures. 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
While MiCA purports to be a single regime, 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’re already seeing some divergence between EU member states in terms of taxes imposed on crypto firms and the ease with which firms can interact with existing infrastructure.
Non-EU Companies: A Choice
For non-EU cryptocurrency companies, this means they can choose the best jurisdiction for their needs. However, this takes careful consideration as advisers in each jurisdiction will seek to sell themselves. The cost differences can be substantive, and companies are using specific strategic solutions to reduce EU access costs by around 90%.
The Cost of Compliance
Given the cost of compliance with MiCA can be minimized, 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 impact.
While Web3 natives may not see the UK as market-leading because English law is often used for international business deals, regulators are usually interested in the UK’s position in drafting their frameworks. In fact, the outcome of the European Securities and Markets Authority’s guidance on reverse solicitation provided under MiCA leads to a similar outcome as the UK financial promotion rules.
Global Collaboration
Regulators around the world are collaborating to set common minimum global standards. Companies that take a UK-first approach to their products benefit from an established and robust legal framework internationally recognized by other jurisdictions.
Conclusion
The UK’s regulatory advantages in cryptocurrency regulation are often overlooked, but they offer a significant advantage for companies looking to expand into new markets. By considering the UK’s regulations, companies can minimize costs, ensure compliance, and take advantage of the country’s deep network of legal and financial services.
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 only 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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