Followers of the crypto industry with an interest in the UK may recall positive messages emanating from the British authorities throughout 2023. According to Prime Minister Rishi Sunak, speaking at a London launch event for the heavily crypto-invested VC firm Andreesen Horowitz earlier this year, his intent was to “turn the UK into the world’s Web3 center”.
This came around a year after the British Government–while Sunak was still Chancellor of the Exchequer–published plans “to make Britain a global hub for cryptoasset technology and investment.”
What’s more, the Bank of England recently published lengthy regulatory proposals aimed at safely enabling “systemic payment systems using stablecoins and related service providers”, and stating that, “stablecoins have the potential to be used by many people in the UK for everyday payments. Regulation lays the groundwork for safe and sustainable innovation in money and payments.”
Two Very Different Stories
With senior politicians on board and the Bank of England recognizing the disruptive shifts enabled by distributed ledgers, a sense of directional momentum was emerging. Furthermore, these developments boosted the likelihood of the UK competing effectively alongside the EU and its new, continent-wide regulatory framework for the crypto industry, MiCA. However, while all this has been playing out, some actual crypto users in the UK may have been experiencing a different story.
For those in Britain who interact with crypto via centralized platforms, and for whom on and off ramps between crypto and fiat currency are vitally important, it’s been a year of narrowing options, with some services halted at major firms including PayPal, Luno, Bybit and KuCoin. And now, following along with this trend, comes news that digital bank Revolut will be pausing some of its crypto services in the UK.
What’s Happened at Revolut?
According to an email sent by Revolut to its Business customers, the popular banking platform will be temporarily pausing the ability of its UK-based Revolut Business customers to buy crypto, with these changes effective as of January 3rd 2024. Holding and selling crypto will still be allowed, and the changes do not affect Revolut Retail customers, who are still able to buy, sell and hold as usual.
As for why this is necessary, Revolut states that it’s due to the Financial Conduct Authority (FCA)’s new regulatory requirements for crypto asset investments, which takes effect from January 8th. Accordingly, Revolut states in the email to Business customers,
“We’ll need to adjust our current Business crypto offering to make sure all of the new requirements are met.”
The FCA’s financial promotion rules for cryptoassets were published in June of this year, and since October, all firms promoting crypto assets to retail consumers have been required to register with the FCA, while an FCA summary of its new crypto rules, which was published in November, states that,
“A central requirement of our financial promotion rules is that financial promotions must be fair, clear, and not misleading.”
From there, the FCA guidelines are dense and far-reaching, taking in stablecoins and yield-generating assets, and perhaps creating significant obstacles for crypto firms intent on operating in the UK, since the crypto industry tends to take the move fast and break things tech mantra and amp it up to eleven, rather than offering clearly verifiable proof of function before launch.
It stands to reason, then, that any firms offering investment in crypto assets may require further time to ensure that they are fully in line with the FCA’s new regulatory requirements, and so the question now is where the UK crypto industry may be positioned a few months down the line.
Revolut to pause crypto buying for UK business customers https://t.co/kHmQ3N1uTy pic.twitter.com/0ddpRyZcAr
— Tech.eu (@tech_eu) December 18, 2023
Temporary Bumps in the Road?
It’s notable that Revolut has emphasized the temporary nature of its crypto halt, referring to it only as a “pause” and outlining that it is working to ensure regulatory compliance. What’s more, the FCA is not simply bundling up crypto with existing rules that may not be compatible with a novel new asset class. For a look at the legal battles that latter kind of approach ignites, glance across the Atlantic at the SEC and its ongoing clashes with crypto firms in the US, as it (the SEC) insists that traditional securities laws can incorporate crypto.
1/3 Promise made, promise kept: we are now on file with Third Circuit to challenge the SEC’s arbitrary and capricious denial of our petition for crypto rulemaking. We again appreciate the Court’s consideration.
— paulgrewal.eth (@iampaulgrewal) December 15, 2023
By contrast, the FCA–as with the aforementioned MiCA in the EU–is setting out new guidance, and appears willing to consider crypto on its own terms. This indicates an acceptance of the crypto industry and its idiosyncrasies, but this is combined with a recognition that applying some variety of regulation has become a priority.
One reading on the spate of firms now feeling forced to pause some of their UK crypto services, is not that the FCA’s rules are overly imposing or inherently unworkable, but rather, that new guidance simply comes with too short a deadline within which to ensure compliance.
And so with 2024 shaping up, potentially, to be a big year for blockchain, the picture for the UK remains in flux, and crypto operators will be working to ensure that bumps in the road precipitate smoother highways.
