The rise of cryptocurrency interest around the world has been nothing short of staggering in recent years, and the UK is certainly no different. From its earliest well-known iteration – Bitcoin – there are now countless digital currencies available, and things don’t look like they will be slowing down any time soon. As we’ve seen the world take small but sure steps towards mass adoption, the UK has seen a significant increase in the number of people wanting to get involved in the space. It makes sense – decentralisation, improved digital security, and investment opportunities are all appealing. However, this continued growth has presented several challenges that have necessitated the intervention of regulatory bodies around the world.
2023 was a significant year for crypto regulations in the UK, with changes being introduced in the hope of getting ahead of possible nefarious parties within the space. Investor protection, reduction of illegal activities, and financial stability are just a few examples of regulatory shift reasoning throughout the year. However, as the crypto industry continues to grow and evolve, it’s fair to say that nations – including the UK – will be required to adapt to ensure their regulatory frameworks meet the required standards. In this post, we’ll look at the regulatory changes that have been introduced to the UK’s crypto industry in 2023, as well as what development we can expect in the future.
How Has Crypto Grown in the UK?
There’s no doubt that the crypto industry has been growing significantly around the world in recent years – and the UK is well and truly getting involved. Even if you’re not looking at the statistics, you can see physical evidence of how things have evolved in this space in recent years. Only a few years ago, crypto talk was reserved for the likes of niche forums and groups. These days, major news outlets regularly discuss the latest Bitcoin price and other cryptocurrency developments.
Getting a bit more technical, Statista recently released data about crypto revenues around the world. In what is a significant upward trend, the UK alone has seen crypto revenues increase by roughly 125% over the previous 12 months to a whopping $1.89 billion (approx. £1.48 billion).
Why Have Crypto Regulations Increased in the UK in 2023?
The UK government views crypto as an industry that needs to be heavily regulated, much like the gambling industry with slots with high payout rates. In simple terms, many believe that crypto trading should be treated like gambling because it has a high-risk nature. The idea here is to regulate the space, which will ensure market integrity and, therefore, help to protect investors. Of course, this is more difficult than it appears due to the decentralised nature of crypto.
What Financial Crypto Regulations Have Been Introduced in the UK in 2023?
One of the biggest crypto regulation changes in the UK will start in September 2023. The Financial Conduct Authority (FCA) has introduced something called a ‘Travel Rule’ in which crypto asset businesses must collect, verify, and share information about transfers.
The purpose of this is to improve crypto transfer transparency, which will make nefarious activities more difficult to get away with. For example, by forcing crypto businesses to obtain and verify information, such as full name, date of birth, and address of those sending and receiving crypto assets, the FCA believes it will be able to clamp down on things like money laundering and terrorist financing.
What Advertising Crypto Regulations Have Been Introduced in the UK in 2023?
Another UK crypto regulation commencing in October 2023 relates to advertising. The FCA has made it mandatory for crypto businesses to include clear risk warnings within any advertising. The plan here is to ensure customers understand that any investments they may are liable to loss. Furthermore, promotions that offer bonuses for introducing others to crypto products and services will be prohibited, and customers will have to wait through a 24-hour cooling-off period following registration with a crypto business before they can invest.
This seems like a reasonable set of regulations because crypto investing has often been advertised as a get-rich-quick solution and, although some people do indeed earn a lot from their investments, many others lose everything. There needs to be a balance between allowing people to invest in opportunities they are interested in and making sure that false advertising isn’t taking place. With risk comes responsibility on behalf of businesses offering such services to fully inform clients of potential losses.
How Have These Changes Been Received?
The regulatory changes introduced by the FCA seem to have been received positively for the most part. For example, Johanna Noble, a writer for the Sunday Times, has spoken about the correlation she sees between the gambling addiction suffered by her grandfather and the appeal of crypto investments for young people. These changes should help to address at least some of the worry that crypto advertising is going unchecked.
We have also seen businesses react to the news, with PayPal reportedly placing a temporary halt on crypto sales within the UK. This isn’t surprising – businesses will want to make sure that they are operating within the terms of the new advertising regulations. As such, changes may need to be made to current advertisements to avoid penalties.
What Regulatory Changes Can We Expect in the UK in the Future?
There is no doubt that crypto regulations will continue to be implemented within the UK. A lot of what is to come also depends on how things evolve within the space. One such rumoured regulation relates to stablecoins and deals with issuance, payments, exchanges, leverage, safeguarding and more. This type of regulation could affect the likes of PayPal, which has recently announced the launch of its stablecoin – PYUSD.
For now, we’ll need to see how the new regulations get on once they are launched later this year. However, it does seem that there will be some big attempts to remove a lot of the sketchy practices we hear about within the crypto space, which would be a good thing for those businesses looking to genuinely harness the power of new tech.
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