Does the UK need to take a stronger cryptocurrency position?

A guest editorial by Peter Curk, chief executive officer of ICONOMI

It’s a strange time in cryptocurrency. After years of threats and a decade of freedom, regulation is finally creeping in. The European Union (EU) is the first to make a play, with the June 2023 introduction of the Markets in Crypto-Assets (MiCA) regulation, and it’s splitting opinions. While some are positioning MiCA as the building of an overdue comprehensive regulatory framework, others say it’s nothing if not over-regulation. As the first of its kind, MiCA had only the regulation of traditional finance to use as its framework, but it’s not a perfect fit for the innovation and dynamism of the crypto industry. So, could the UK do better? Is it time for the UK to take advantage of the MiCA situation and make a play for a stronger position in the global cryptocurrency arena? 

The problems with the regulation of cryptocurrency 

There’s no argument against the need for regulation in the crypto space. For years, the industry has been beset by bad actors taking advantage of the opaque framework, making it an uncomfortable and risky place to invest. Regulation would not only help to protect investors, shielding consumers from some of the most common risks associated with investing in crypto-assets, but it would also help to ensure financial stability, making the crypto market safer for closer integration with traditional finance.  

The problem is that cryptocurrency has always been an intricate and consistently evolving area. Innovation happens rapidly and regularly, and for that, freedom is required. The fear for many is not just that regulation will hinder innovation and prevent growth, but that innovation will hinder regulation, and open gaps for investors to fall through. And that’s the landscape that MiCA is attempting to contain.  

MiCA and what it means for cryptocurrency

There are always murmurs of negativity whenever new regulation is launched. But with crypto, despite the scepticism, the vast majority of stakeholders agreed that something needed to be done to protect consumers. There’s a lot of fraud in the market and a considerable lack of transparency. MiCA set out to address that, but it’s had problems from the start, leaving many in the field concerned. 

To start with, MiCA’s regulatory technical standards (RTS) were published very late – not until the end of 2024, more than 18 months after the introduction of MiCA. These standards operationalise MiCA’s framework, and the lack of clarity in this area created a lot of uncertainty.

Then, there is the question of industry development. As mentioned, this has always been a concern whenever crypto regulation has raised its head. So, while few would argue against any regulation in the field, the high level of requirements put in place by MiCA has left a large number of people and businesses concerned about the potential negative impact on innovation and industry development in the EU.  It’s reached the point where it’s become far too expensive to start a new crypto business in the EU, which can only cause innovation to falter.

Additionally, there are concerns over consumer benefits. The end consumers will ultimately pay the new regulatory costs imposed on crypto businesses through fees.

Lastly, there’s the problem of the stablecoin rules. Because stablecoins can be volatile and can act as a conduit for risk between traditional and crypto markets, unstable stablecoins hold the power to endanger both the EU’s financial system and crypto markets. The new MiCA rules do not adequately guard against that.

Individually, most of these issues can be overcome. But together, they call into question the suitability of MiCA. This opens opportunities for other territories, including the UK.  

How could MiCA benefit the UK’s crypto status? 

With MiCA deterring crypto businesses, the UK has the potential to strengthen its position within the crypto market through scaling.   

My business, for example, is based in the UK and Netherlands. Our market is currently healthy. But with EU businesses and investors looking to work in other territories to avoid the fallout from MiCA, we’ve already experienced an influx of customers. And we can passport the license in other EU member states.  

And then there are the lessons that can be learned through MiCA’s first attempts. Regulations boost investor confidence, attract businesses, and enhance customer protection, by providing clarity, they bring stability. However, they can only do that if they also allow for growth and innovation. 

As I write, the UK government is actively looking at crypto regulation. The Financial Conduct Authority (FCA) is developing a comprehensive regulatory framework for cryptoassets, including plans to regulate stablecoins and other core crypto activities, with an implementation aim of 2026. And they have the advantage of assessing where the EU has gone wrong, which could be a crucial benefit.  

Regulation in cryptocurrency is as essential as it is in any other financial service. In crypto, there has always been an element very close to gambling – a sense of fear, and greed, and hope. All things that can easily be exploited. There is a very great need to protect the vulnerable and those non-native crypto users who are simply looking to explore new investment possibilities. However, the EU’s approach has its limitations. It’s not for me to say whether it is fit for purpose. But I will say that the uncertainty that MiCA has created, inevitably opens up significant opportunities for the UK to establish a greater role on the global crypto scene.  

Peter Curk is the chief executive officer of ICONOMI, a leading platform in digital asset management. With a background in finance and blockchain, Peter is passionate about making crypto investing accessible and easy for everyone. Under his leadership, ICONOMI has grown into a trusted name in the industry, offering innovative solutions for individuals and institutions alike.

Image: ICONOMI

Guest Editorial This article was produced specially for Fintech Intel by an expert guest contributor.