Cryptocurrencies have been around for over a decade, and while they have entered the public consciousness in the UK, and are coming into increasing circulation, there is still a grave fear about them.
We will have all heard of Bitcoin and Litecoin, but cryptocurrencies are known for being wildly volatile, and they have experienced some instability over the past 12 months.
The UK isn’t the only country facing the dilemma of how to safely introduce and regulate cryptocurrencies, with the Netherlands also facing similar challenges.
But what is the current legal framework for cryptocurrencies in the UK? What is the typical usage? And what are the hurdles that need to be overcome? All of this and more will be discussed in our comprehensive guide.
Assessing Cryptocurrency Usage in the UK:
Cryptocurrency usage has shot up in the past few years. A survey last month revealed that approximately 1.5 million people owned crypto assets in the UK, compared to 9.8 million in 2021.
Dogecoin was also widely adopted, and it supposedly has the fourth-highest ownership rate at 17%. Overall, in the three years between 2018 and 2021, cryptocurrency increased by an astonishing rate – 650%.
Building a Digital Economy
As things stand, there is no tangible legal framework in place to regulate the flow of cryptocurrencies in the UK. The downfall of FTX last year, which resulted in the arrest of its founder, served as a painful reminder of how tighter restrictions need to be put in place, especially when billions of dollars were lost by investors, some of which emanated in Britain.
There have been suggestions that we could still be some way away from a digital pound being incorporated. A senior bank official recently admitted that a digital pound could still be five years away, but whether it materializes remains to be seen.
For some months, a central bank digital currency (CBDC) has been in the pipeline and the Treasury has been consulting the issues, and it is seen as a natural trajectory for the rise of cryptocurrencies. However, the government has made it clear that cryptocurrencies and legislation referring to them should be robust.
Putting Plans in Place
Progress with regulating cryptocurrencies is very much at a preliminary stage, although there are draft plans that are being worked on. This was outlined by Financial Services Minister Andrew Griffith.
He said: “Our view is that this [FDX] reinforces the case for clear, effective, timely regulation and proactive engagement with industry.
“This includes a proposal to bring centralised crypto asset exchanges into financial services regulation for the first time, as well as other core activities like custody and lending.”
Although nothing has been finalised, it is thought that the new rules would cover crypto-related admission to a trading platform, and mitigate any potential safety risks.
The rules, should they become effected, would cover crypto firms in Britain or those that provide services to UK-based firms. To qualify, firms would need to have a license, as well as meet the minimum capital and liquidity requirements.
And then it would be up to the Financial Conduct Authority (FCA) to decide whether a foreign operator would need to have a tangible presence in the UK.
Barriers to a Crypto Takeover
At various stages, there are underlying issues with cryptocurrency. The first of which is that the security of crypto assets can be breached. Such attacks can cause transactions to be paused, and prevent miners from verifying blocks, which in turn, can cause a double spend of coins. As we have seen, cryptocurrencies can be highly volatile, which can cause much uncertainty in the market.
Indeed, there are several potential hurdles to be overcome before a full crypto takeover occurs in the UK. Of course, regulation is paramount and having a fully robust system in place to deal with the financial rigours is of course paramount, or else it could go pear-shaped quite quickly.
There are a few companies in the car manufacturing world that have opened themselves up to crypto, such as Renault, who have been told they will be forced out of the UK if they don’t wind down their crypto activities as they need authorization from the FCA.
On the other hand, many industries have yet to fully appreciate the effectiveness of crypto. This can be applied to the health and retail industries, where other traditional forms of payments, such as credit and debit cards, and even e-wallets, such as PayPal are preferred.
While the online gambling world has slowly started to accept cryptocurrencies as a payment method, it isn’t the case for all digital casinos. Most of the top casinos in the UK, including the ones listed at online-slot.co.uk, are yet to embrace cryptocurrencies. This is also the case for the likes of LeoVegas Casino and Duelz Casino.
Attractiveness of Crypto
That said, crypto comes with a variety of benefits that make it inherently attractive. One of which is the transactional speed. It is extremely convenient, and whereas some methods may take up to three to five business days to send money to friends and family, cryptocurrencies can process payments within 24 hours.
The diversity of cryptocurrency also makes it an attractive proposition. It provides a fine source of a portfolio of diversification, especially for those who like to play stock markets and would rather move away from the standard stocks and bonds out there. There are things that cryptocurrencies are doing well with right now, and it is important to look at the bigger picture before investing.
Above all else, the privacy afforded by cryptocurrencies makes it appealing. Any transactions made on the blockchain will be pseudonymous, and your financial data won’t be shared with third parties.
Bottom Line
Crypto clearly still has a few hurdles to clear before it is embraced by the government, and regulators may have to take a different approach rather than just shrug their shoulders. It is possible to envision a future for crypto in the UK, but only time will tell as to how it will evolve.