In a busy start to April 2022 for the British chancellor, Rishi Sunak announced his intention to make the UK a “global hub for cryptoassets technology”. Put simply, this means he wants the country to be an attractive place for cryptocurrency companies to operate.
For the government, this requires a delicate regulatory balance between preventing financial crime and protecting consumers, and allowing cryptocurrencies to flourish. If all goes to plan, greater engagement with the sector could result in a welcome boost to the UK economy.
Following efforts by the US and others to address cryptocurrency standards, UK officials this week said they want Britain to lead the world and create their own government-backed digital token for international trade.
“We want this country to be a global hub — the very best place in the world to start and scale crypto-companies,” said John Glen, MP and UK Economic Secretary to the Treasury.
Glen’s comments came during a keynote speech at the Innovate Finance Global Summit during Fintech Week 2022. He also asserted the UK is the leading European financial technology (Fintech) hub, “second only to the US worldwide.”
The minister said work is under way to regulate stablecoin and develop more of a regulatory framework for digital assets. He said that the UK Chancellor has asked the Royal Mint to create a non-fungible token (NFT) to be issued this summer.
NFTs are digital tokens representing data, media, or valuable assets, such as real estate or memorabilia. The intrinsic value of NFTs varies wildly based on what they represent, making their value highly subjective. The popularity of NFTs, however, has soared in recent years.
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It’s early days of course, and many central banks and economists remain unsure of the role cryptocurrencies should play in a nation’s financial makeup. But Sunak’s plans featured some eye-catching proposals, including removing tax barriers, and developing a non-fungible token (NFT) with the Royal Mint.
But the key element was a proposal to bring a particular element of cryptocurrencies, “stablecoins”, within the scope of existing UK banking regulation. Stablecoins are widely considered to be at the safer end of the sector, where the notorious volatility of other cryptocurrencies like Bitcoin is replaced with something more reliable.
So where Bitcoin’s value is derived purely from levels of confidence and demand, stablecoins are backed by other assets. Usually this means traditional currencies (usually the US dollar), but some are attached to commodities like gold. Either way, the aim is the same – to keep their value as close to constant as possible, making stablecoins more useful as a reliable medium of exchange.
Stablecoins may also have attracted the UK government because they offer fast transactions, at low cost and without borders. This allows users to make speedy global transactions with individuals and businesses, without the need to exchange currencies into a local tender.
