According to a crypto adoption ranking by blockchain analytics firm Chainalysis, the UK is one of the top 20 countries in the world. YouGov figures show that as of August 2, 2023, 11% of all adults in the country have bought cryptocurrency in the past. In 2018, only about 1.5 million owned at least one cryptocurrency in the UK. By 2021, this number jumped a stunning 650% to 9.8 million. Of those who own crypto, 42.8% held Bitcoin (BTC), while 32.9% owned Ether (ETH).
The UK government is designing regulations that support the growth and adoption of cryptocurrencies. As the crypto space evolves, these laws sometimes change or are updated to keep up with events in the industry. For instance, the UK government, like most others, laid out new crypto regulation guidelines in reaction to the FTX collapse last year.
Regulatory Authorities in the UK
The Financial Conduct Authority (FCA) is the primary regulatory body for financial matters and is also in charge of the crypto sector. The FCA is responsible for ensuring that all licensed crypto services providers adhere to rules and regulations stipulated by the government. For instance, crypto service providers are mandated to implement guidelines to meet know-your-customer (KYC), anti-money-laundering (AML), and combating-the-financing-of-terrorism (CFT) requirements. The Bank of England and the HM Treasury, also called the Exchequer, are other government bodies that regulate crypto.
Updates to Crypto Rules in the UK
Over time, authorities have made multiple changes to cryptocurrency rules in the UK. There are now a few updates to regulations that guide crypto use, especially for service providers operating in the country.
The UK Parliament passed the Financial Services and Markets Bill, making the country one of a growing list of countries properly regulating the sector. The bill puts the UK ahead of the United States, which has yet to introduce robust cryptocurrency regulations at the federal level. The FSMB contains a few provisions for crypto use in the UK, including supporting the safe adoption of cryptocurrencies. In addition, the FSMB establishes the use of sandboxes – essentially testing environments – that can be used to support the adoption of blockchain and other new technologies in the nation’s financial markets.
Another update is an FCA regulation that tackles aggressive marketing from crypto companies. The agency now requires that all crypto ads are unambiguous, fair, and filled with warnings about crypto trading risks. In addition, the FCA has banned companies from offering bonuses to users who refer their friends.
Furthermore, the UK is now introducing the Travel Rule for crypto transactions. Although the Travel Rule has been in effect in the traditional financial sector, the FCA has made it mandatory for crypto. The Travel Rule requires that crypto service providers collect, verify, and exchange information when transferring crypto assets.
According to a recommendation from the Financial Action Task Force (FATF), the originating virtual asset service provider (VASP) must verify the sender’s name, account number, and physical address or other means of identification like identity number, customer identification, or the place and date of birth. For the beneficiary VASP, required verifications include the beneficiary’s name and account number.
The UK Set to Become A Crypto Hub
The government announced last year that it intends to make the UK a global crypto technology hub. This announcement and the expected support from the government will have far-reaching effects on the company’s economy across multiple sectors. For instance, the UK’s online gambling sector is likely to benefit considerably from widespread adoption and support for crypto.
According to official figures, the UK generated £6.9 billion in total Gross Gaming Yield (GGY) from April 2020 to March 2021, an 18.4% increase from the same period in the previous year. Online casinos contributed £4 billion, nearly 58% of the total.
These figures are likely to increase for two reasons. Firstly, the UK made a few amendments to laws governing betting and gambling in the UK. As part of the amendments, the Gaming Commission appointed an ombudsman to mediate disputes. It also now has more statutory powers to prosecute illegal casino providers that operate on the black market. In addition, one of the latest betting updates in the UK provides for scrutinizing bonus offers targeted at new players. The government considers this necessary due to concerns that bonuses are designed in ways that may harm gamblers. Consequently, people are likely to bet more if they feel adequately protected by regulators.
