The landscape of the cryptocurrency industry is undergoing a significant shift as regulatory pressures in the United States are forcing Web3 firms to look beyond their borders. In an exclusive interview with Yahoo Finance UK, Tom Duff Gordon, Vice President of International Policy at Coinbase, shared insights into the reasons behind the harsh US crypto regulations and how this presents a golden opportunity for the United Kingdom to fulfill its aspirations of becoming a global cryptocurrency hub.
The US crypto sector is facing a regulatory conundrum as authorities attempt to squeeze innovative technology into an outdated regulatory framework. According to Gordon, the US regulators are leaning towards enforcement-driven regulations rather than a collaborative approach. He emphasised Coinbase’s preference for engagement-based regulation, underscoring the excessive enforcement-oriented approach taken by the US. This has created an unending debate around cryptocurrency regulation in the country.
The migration of Web3 firms from the US has paved the way for more favourable regulatory conditions in international crypto hubs like Singapore, Hong Kong, and Dubai. Companies such as Revolut and Gamestop, which have ventured into the world of Web3, are shutting down their blockchain-based applications in the US to avoid potential legal actions from regulators. It is within this context that Gordon believes the UK is well-positioned to seize the opportunity and establish itself as a global cryptocurrency hub. Notably, major Web3 players like Coinbase and A16z have already expanded their operations in the UK this year.
Gordon contends that the US now finds itself as an outlier in the global crypto landscape, highlighting the progressive developments in other jurisdictions. The EU has approved the Markets in Crypto Assets law (MiCA), while the UK has put forward its own proposals for regulating crypto asset activities within its borders. The UK government has expressed its ambition to turn the country into a global Web3 hub, with the HM Treasury providing clear guidelines on crypto asset regulation.
The UK Treasury’s proposal, unveiled at the end of October, marks a pivotal moment in the UK’s crypto journey. It outlines the government’s intentions to regulate various crypto asset activities within the financial services regulatory framework. Gordon praised the proposal, describing it as “very cogent and compelling.” The initial phase focuses on stablecoin oversight, followed by a second step aimed at regulating centralised crypto players like exchanges, including Coinbase.
Gordon believes that the UK now possesses the opportunity to embrace blockchain and cryptocurrency technology to modernise its financial system. The implementation of this technology could result in more efficient peer-to-peer payments, reduced intermediaries, and faster transactions, democratising access to several types of investments such as tokenized funds, stocks, and shares. This transformation promises to benefit the UK while attracting jobs and investment from innovative companies in the crypto sector.
In contrast, the US is grappling with complex regulatory structures that hinder the development of a comprehensive crypto regulatory framework. The presence of multiple regulatory bodies, such as the CFTC and the SEC, has created a jurisdictional dilemma, with debates surrounding whether crypto tokens should be treated as commodities or securities. The outdated Howey Test from 1946 is still being used in the US to determine the classification of assets, further complicating matters.
As the US struggles to find a clear path, the UK is taking a proactive approach towards becoming a global crypto hub. The UK government, led by Chancellor Rishi Sunak, recognises the significance of crypto and digital assets in shaping the future of finance and job creation. Unlike some other jurisdictions, the UK has engaged with industry leaders to craft effective regulations. Europe has already emerged as a thriving hub for crypto startups, with London leading the way in terms of venture capital investments in 2022 and making big strides towards realising its ambition of becoming a leading crypto hub in Europe and beyond.
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