Earlier this year we saw the SEC grant approval for ‘spot’ Bitcoin exchange-traded products (ETPs). This was a seminal moment for the sector – offering crypto investors direct Bitcoin exposure, while also providing the security and regulatory protection traditional investors are used to. Within a couple of weeks, we saw $4bn net worth of inflows to these products and in March alone these captured over $110bn in trading volume.
It is clear that strong regulation leads to greater confidence to trade and invest.
Here in the UK, the FCA has prohibited these products to retail consumers since 2020 and I am concerned that we are missing out on a significant opportunity. On the one hand, these products have been opened to professional investors, including investment firms and credit institutions – which is good news; however, on the other hand, such a move risks making the opportunities elitist and limits the associated benefits. The general public will miss out.
These restrictions are also preventing the government’s objective of the UK becoming the ‘world’s web3 centre’!
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As Vice Chair of the Financial Markets and Services All-Party Parliamentary Group, I have long advocated for well-crafted policy and sensible regulation that can better protect consumers whilst fostering safe innovation. I am concerned that the FCA’s restrictions achieves neither.
The FCA’s crypto ETP ban was introduced “due to the harm they pose”, however the ban does not mitigate the risk. The reality in the digital era means that crypto assets are freely available through unregulated offshore entities. The consequence of the prohibition has guided consumers toward these unregulated entities- which generally operate without any form of regulatory oversight. This exposes investors to inappropriate products, fraudulent activities, and scams. This instance exemplifies the utilisation of a specialised tool for a specific problem, underscoring a regulatory approach that safeguards its own boundaries, potentially at the expense of retail consumers – a trend reminiscent of the challenges encountered with minibonds.
It is clear there is strong demand that needs answering. The latest research by the Financial Service Compensation Scheme found that 18% of the UK has experience investing in crypto – far higher than any other European nation. The same research also found that Bitcoin topped the list of known investment opportunities – 76%. This is 19% higher than share dealing! Giving consumers the choice withing a robust regulatory framework must be a priority.
Consumers are crying out for this too – research conducted by Opinium Research found that 60% of young UK investors think there are not enough regulated entities offering access to cryptoassets.
What is more, the crypto landscape has undergone significant change since the FCA last looked at this. Therefore, this is a good time for the FCA to conduct a review.
With the arrival of the Financial Services and Markets Act 2023 and the FCA imminently about to regulate the cryptoasset sector, their belief that these legal and regulated assets are inherently different from others no longer applies. The crypto market has evolved since the FCA last looked at this and it is time to act. There has been a rapid increase in the adoption – with 6.1% growth in UK crypto investors from 2020 to 2022, equating to over four million people, means that there is the need for a regulatory framework.
Other European jurisdictions like Sweden, Germany, Norway, Netherlands, & Switzerland have embraced these products and we can learn from their early moves. Currently, the London Stock Exchange is the only major exchange in Europe that does not have any such products listed. In Europe, there are currently over 70 ETPs holding Bitcoin and various cryptocurrencies, collectively valued at an estimated circa £5.5 billion.
It is essential that issuers of such products undergo the same robust scrutiny as other counterparts offering ETPs backed by unregulated assets. This isn’t a compromise on consumer protection or market integrity; rather, it reflects a strategic move to bolster the UK’s position without sacrificing these traditional safeguards.
So, what is the economic opportunity? Well put simply, having a crypto ETP listed on the LSE signals that the UK is open for business, paving the way for ‘digital opportunities’ and positioning us as a global cryptoasset hub. Recent Policy Exchange research underscores the significant benefits of getting this right, with a potential £29 billion capture of cryptoasset activity and the creation of over 36,000 jobs. Policymakers and regulators need to adopt a more mature stance, recognising the challenges but also making the opportunities available in a responsible way.
Regulators must remain independent but they should also respond to the demands of the public. I am concerned that their approach in this area runs counter to government policy and calls from the public at large.
I am calling for pragmatism to help unlock innovation and growth in this country. A commitment from the FCA to deliver on their new growth and international competitiveness objectives and open the door to this area of interest to so many would be a significant step.
Politics.co.uk is the UK’s leading digital-only political website, providing comprehensive coverage of UK politics. Subscribe to our daily newsletter here.
The post Alun Cairns: ‘Why the UK must reconsider its ban on retail Crypto ETP’ appeared first on Politics.co.uk.
It is clear that strong regulation leads to greater confidence to trade and invest.
Here in the UK, the FCA has prohibited these products to retail consumers since 2020 and I am concerned that we are missing out on a significant opportunity. On the one hand, these products have been opened to professional investors, including investment firms and credit institutions – which is good news; however, on the other hand, such a move risks making the opportunities elitist and limits the associated benefits. The general public will miss out.
These restrictions are also preventing the government’s objective of the UK becoming the ‘world’s web3 centre’!
***Politics.co.uk is the UK’s leading digital-only political website, providing comprehensive coverage of UK politics. Subscribe to our daily newsletter here.***
As Vice Chair of the Financial Markets and Services All-Party Parliamentary Group, I have long advocated for well-crafted policy and sensible regulation that can better protect consumers whilst fostering safe innovation. I am concerned that the FCA’s restrictions achieves neither.
The FCA’s crypto ETP ban was introduced “due to the harm they pose”, however the ban does not mitigate the risk. The reality in the digital era means that crypto assets are freely available through unregulated offshore entities. The consequence of the prohibition has guided consumers toward these unregulated entities- which generally operate without any form of regulatory oversight. This exposes investors to inappropriate products, fraudulent activities, and scams. This instance exemplifies the utilisation of a specialised tool for a specific problem, underscoring a regulatory approach that safeguards its own boundaries, potentially at the expense of retail consumers – a trend reminiscent of the challenges encountered with minibonds.
It is clear there is strong demand that needs answering. The latest research by the Financial Service Compensation Scheme found that 18% of the UK has experience investing in crypto – far higher than any other European nation. The same research also found that Bitcoin topped the list of known investment opportunities – 76%. This is 19% higher than share dealing! Giving consumers the choice withing a robust regulatory framework must be a priority.
Consumers are crying out for this too – research conducted by Opinium Research found that 60% of young UK investors think there are not enough regulated entities offering access to cryptoassets.
What is more, the crypto landscape has undergone significant change since the FCA last looked at this. Therefore, this is a good time for the FCA to conduct a review.
With the arrival of the Financial Services and Markets Act 2023 and the FCA imminently about to regulate the cryptoasset sector, their belief that these legal and regulated assets are inherently different from others no longer applies. The crypto market has evolved since the FCA last looked at this and it is time to act. There has been a rapid increase in the adoption – with 6.1% growth in UK crypto investors from 2020 to 2022, equating to over four million people, means that there is the need for a regulatory framework.
Other European jurisdictions like Sweden, Germany, Norway, Netherlands, & Switzerland have embraced these products and we can learn from their early moves. Currently, the London Stock Exchange is the only major exchange in Europe that does not have any such products listed. In Europe, there are currently over 70 ETPs holding Bitcoin and various cryptocurrencies, collectively valued at an estimated circa £5.5 billion.
It is essential that issuers of such products undergo the same robust scrutiny as other counterparts offering ETPs backed by unregulated assets. This isn’t a compromise on consumer protection or market integrity; rather, it reflects a strategic move to bolster the UK’s position without sacrificing these traditional safeguards.
So, what is the economic opportunity? Well put simply, having a crypto ETP listed on the LSE signals that the UK is open for business, paving the way for ‘digital opportunities’ and positioning us as a global cryptoasset hub. Recent Policy Exchange research underscores the significant benefits of getting this right, with a potential £29 billion capture of cryptoasset activity and the creation of over 36,000 jobs. Policymakers and regulators need to adopt a more mature stance, recognising the challenges but also making the opportunities available in a responsible way.
Regulators must remain independent but they should also respond to the demands of the public. I am concerned that their approach in this area runs counter to government policy and calls from the public at large.
I am calling for pragmatism to help unlock innovation and growth in this country. A commitment from the FCA to deliver on their new growth and international competitiveness objectives and open the door to this area of interest to so many would be a significant step.
Politics.co.uk is the UK’s leading digital-only political website, providing comprehensive coverage of UK politics. Subscribe to our daily newsletter here.
The post Alun Cairns: ‘Why the UK must reconsider its ban on retail Crypto ETP’ appeared first on Politics.co.uk.