Written by Ben Urquhart 

The government has recently announced plans to make the UK a global cryptoasset technology hub. This comes further to the government’s consultation on cryptoassets and stablecoins last year. The ultimate objective of the consultative process is to build a financial services sector that the rest of the world looks towards. The development of the cryptoasset market will play a crucial role in achieving that.

One of the main measures announced by the government is to bring stablecoins within the payments regulatory perimeter paving their way for use in the UK as a valid form of payment. Endorsement and co-operation for cryptoassets from government will likely create the necessary conditions for stablecoin issuers and service providers to operate and invest in the UK.  We will provide further detail of the upcoming changes in future blog posts.

A financial market infrastructure sandbox will also be introduced to enable firms to better experiment and innovate, in particular by allowing Distributed Ledger Technology (DLT) to be tested. A research programme will also be launched by government to explore the feasibility and potential benefits of using DLT for sovereign debt instruments.

Another ambition of the government is to have a stronger relationship with industry. To action this, the government has announced that the Economic Secretary to the Treasury, John Glen, will establish and chair a Cryptoasset Engagement Group. This will convene key figures from both industry and the regulatory authorities to advise the government on the main issues facing the cryptoasset sector. The FCA will also hold its own two day ‘CryptoSprint’ in May with industry participants to seek views from industry on the development of a future cryptoasset regime.

Other measures announced include commissioning the Royal Mint to begin work on a Non-Fungible Token (NFT) this summer as an emblem of the forward-looking approach the UK is taking and to review the UK tax system to identify ways of enhancing the tax framework to encourage further development of the cryptoasset market. This will include reviewing how DeFi loans – where cryptoasset holders lend out their tokens for a return – are treated for tax purposes and the scope of the Investment Manager Exemption.

The package of measures aims to help ensure start-ups in the cryptoasset market can scale easier by having access to capital, resources and people sooner, whilst at the same time ensuring the UK financial services sector remains at the cutting edge of technology use, attracting investment and creating jobs and sparking new innovation.