This analysis, co-authored by Zoe Wyatt, Partner and Head of Web3 & Disruptive Technology at Andersen LLP, and Dion Seymour, Crypto and Digital Assets Technical Director at Andersen LLP, examines the impacts of the election on the UK crypto industry
Is crypto an election topic?
In the UK, crypto is unlikely to be an election topic unlike in the US, where we have seen crypto being discussed for the first time in an American Presidential primary debate. The political environment in the US couldn’t be more different from the UK. Donald Trump has endorsed crypto and presented himself as a crypto champion[1]. If elected, this could be significant for the US crypto community. Trump is no stranger to crypto with the former President even creating his own NFT collection, “Trump Digital Trading Cards,” with little criticism. This starkly contrasts the disparagement Rishi Sunak has received from Labour, which branded the Royal Mint NFT as a vanity project[2].
Recent funding from the crypto sector for US lobbying has reached over $115 million. Crypto firms are increasingly pressing on the political scene through advocacy groups such as Coinbase’s “Stand With Crypto,” founded in the US and recently launched in the UK. Notably, Coinbase also recently hired former chancellor George Osbourne. The UK’s lobbying landscape is markedly different: despite remaining important for retail and institutional investors, the main election battlegrounds are elsewhere, and crypto is not making the headlines.
Once an election is called, the civil service enters into “purdah,” a period in which policy statements and ministerial decisions will not be made (as technically there are currently no ministers). This has a knock-on effect on any current policy progress.
What have the conservatives ever done for crypto?
In early 2018, following the 2017 crypto peak, the Government established the “Cryptoasset Taskforce” comprising the FCA, HM Treasury, and the Bank of England. This did not stop the Treasury Select Committee (TSC) from publishing a report in 2018 that called for regulating the “wild west” of cryptoassets and was highly critical of the Government and the regulator.
Before 2022, there was no real ministerial drive regarding crypto, neither seeking to ban nor support it (both approaches seen elsewhere). The Cryptoasset Taskforce report was relatively neutral, and the various government departments continued with the status quo.
This all changed on 4 April 2022 when the Government announced its desire for the UK to be a global hub for cryptoasset technology[3]. Rishi Sunak, in his previous role as Chancellor of the Exchequer, was very much the driving force. This created greater engagement with parliamentary groups on crypto and blockchain, such as various All Party Parliamentary Groups that advocate for crypto in Parliament. Within Parliament, groups such as the TSC have sought to disrupt progress, but no attempts have been made to ban crypto.
Even with a relatively permissive parliament, the UK Government has not succeeded in becoming a global crypto hub. We believe that the government recognises that there is still work to do. On 1 February 2023, the Government set out plans to provide clarity for consumers and businesses and the changes required to reach crypto hub status[4]. It was still actively working on these when the election was called.
This has not been without issues. There are, and remain to be, numerous hurdles in the way to becoming a crypto hub. Perhaps the most significant issue for crypto owners (individuals and businesses) is the inability to access the UK’s banking network. Many banks have either decided not to provide accounts to crypto clients or have removed them. Banking services are the lifeblood of any business. But that is not all. As the FCA has operational independence, it can decide what it thinks is best for consumer protection, which might not align with the Government’s view. To date, the FCA has given permission to only 47 firms to operate. These aspects have held the UK back, and there has been a general lack of progress compared to contemporary jurisdictions. A “crypto hub” the UK is not.
What does the election mean for crypto?
Despite the Conservatives’ crypto hub push, their manifesto does not mention crypto. The same is true for the Lib Dems, and we are still waiting for the Labour manifesto. This is understandable, as crypto is a niche topic that is still poorly understood. This opens up any position (positive or negative) for criticism during campaigning with limited political gains available, disincentivising crypto as a topic of importance for either current or prospective MPs.
However, in its current state, this is actually helpful for crypto as it is not a partisan issue. As crypto is not a central policy for the Conservatives, a Labour victory may not derail the ongoing work.
In the lead-up to the election, members of the Labour Party have been consulting with industry policy leaders and trade groups, such as UKCBC and CryptoUK, to understand the UK’s current crypto environment. While silent on legislation, they have privately supported the tokenisation of real-world assets and the Bank of England’s plan for a digital pound.
As the current Conservative administration is positive towards crypto, it would be odd for a government led by Rishi Sunak to volte-face their direction to date. On the side of Labour, there has been no indication of plans to ban crypto, restrict ownership, or make fundamental changes to the current status quo. Nigel Farage has, however, since the surprise start of his campaign for Reform, come in on the side of crypto[5].
What does the future hold?
A change of perspective can bring positive opportunities, and as crypto becomes less mysterious, politicians of all hues may find the topic more palatable.
However, some of the problems have been out of the Government’s hands, such as the lack of banking access (which is decided by the banks) or how the FCA applies its remit for consumer protection, such as the retail ban on ETPs and derivatives. Contrary to popular belief, even the Government cannot “just make it happen”. Therefore, for things to change, it may require more affirmative action, such as new laws/regulations or codes of conduct. In the absence of these, it is unlikely that we will see any significant alteration to the current issues experienced by the crypto sector.
[1] https://www.reuters.com/world/us/trump-pitches-himself-crypto-president-san-francisco-tech-fundraiser-2024-06-07/
[2] https://www.bbc.co.uk/news/uk-politics-65094297
[3] https://www.gov.uk/government/news/government-sets-out-plan-to-make-uk-a-global-cryptoasset-technology-hub
[4] https://www.gov.uk/government/news/uk-sets-out-plans-to-regulate-crypto-and-protect-consumers
[5] https://www.fnlondon.com/amp/articles/nigel-farage-calls-for-uk-crypto-push-as-reform-campaign-kicks-off-7e5fdfb4
