Brexit & Bitcoin — The U.K. Shows its Appetite for Cryptocurrency Regulation
Theresa May appears triumphant in the House of Commons at the historic Westminster. Somberly dressed in her trademark jacket and pants ensemble, the Prime Minister of the United Kingdom has just managed to get parliamentary approval to re-negotiate the Brexit deal with her European counterparts — this is what victory looks like in Britain today.
Across the Channel in Brussels, European leaders have made clear that there shall be no negotiation of the Brexit deal which May had brought to a raucous House of Commons, meaning that the United Kingdom could well crash out of the European Union with nothing but their hat in hand and a bowl full of stale mushy peas.
Against the backdrop of the Brexit turmoil, British citizens have increased their interest in Bitcoin and other cryptocurrencies. Such has been that increase in interest that even in these uncertain times, the United Kingdom’s financial regulator has deemed it of sufficient import to devote what limited time it has to consider the matter of cryptocurrencies.
To be sure, the Financial Conduct Authority (FCA), the United Kingdom’s financial watchdog has far bigger fish to fry.
With the threat of a no-deal Brexit literally weeks away, the FCA has its work cut out for it — from managing financial regulations without the apron strings of Brussels to managing capital inflows, there are far more pressing matters than dealing with cryptocurrencies whose combined market cap (which remains more aspirational than actual) is only US$125 billion on a good day.
Yet the FCA has been consulting on existing with stakeholders on existing guidance surrounding cryptocurrencies such as Bitcoin and other more “reputable” cryptocurrencies (to the exclusion of sh|tcoins).
One of the primary concerns of the FCA is that companies may be offering unauthorized services which could result in “substantial risk to consumers.”
On Tuesday, the FCA conceded that clarity was needed about what activities and assets fell within its remit, which is surprising, especially given that the FCA has been quite content for as long as the Brexit debacle was continuing to rage in Westminster, to leave cryptocurrencies very much to their own devices.
According to one former FCA staffer,
“Cryptocurrencies were very much not a priority. Brexit was the only thing that mattered.”
The FCA expressed concern that British retail investors may not know what they are getting into when trading in cryptocurrencies, especially the almost negligible levels of protection that they were afforded by both companies and regulators.
According to the FCA,
“Adverts often overstate benefits and rarely warn of volatility risks, the fact consumers can lose their investment, the absence of a secondary market for many offerings, and the lack of regulation.”
As Brexit looms nearer, the inability of Westminster to cobble together any sort of deal to leave the European Union (E.U.) has created a siege mentality among some British citizens.
With scaremongers talking of empty shelves and economic chaos, some doomsday preppers are looking to Bitcoin as a means to protect themselves should the worst happen.
But the reality is probably somewhere in between.
Saying Goodbye is Never Easy
As one of the E.U.’s largest trading partners, the continent needs the United Kingdom as much as the United Kingdom (U.K.) needs the continent.
Beyond the ties of geography and history, the U.K. co-operates with the E.U. on a variety of social, economic and security matters.
The recent move by the FCA is in all likelihood a knee-jerk reaction in response to increased awareness and interest by retail investors in cryptocurrencies.
The move is also welcome because it could help ensure that opportunists, snake oil salesmen and con men of every stripe do not take advantage of a Brexit panic to swindle British citizens by using cryptocurrencies.
With continued pressure on an already soft U.K. economy, the move to increase clarity and regulatory certainty for cryptocurrencies may yet provide the fuel necessary to spark a well-managed resurgence of activity and innovation in the British cryptocurrency space.
Given the political turmoil that Brexit has wrought and Westminster’s seeming impotence to manage a graceful exit from the E.U., one can only hope that the FCA does a better job in regulating cryptocurrencies within its own borders.