UK to Launch New Stablecoin and Cryptocurrency Laws in July
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UK to Launch New Stablecoin and Cryptocurrency Laws in July
As mainstream businesses in the UK increasingly adopt cryptocurrency, this exponential growth and market penetration have driven demand for regulation in the industry.
Navigating Web3 tides with focused insightsBy: News Publisher
Translation: TaxDAO
UK Economic Secretary Bim Afolami plans to introduce new legislation to regulate stablecoins and cryptocurrencies, aiming to address this rapidly evolving industry through licensing requirements, tax implications, exchange platform oversight, and robust security measures.
On April 15, 2024, at the Innovative Finance Global Summit, UK Economic Secretary Bim Afolami announced plans to introduce new laws regulating the issuance and use of stablecoins and cryptocurrencies in the country. This comprehensive regulatory framework is expected to be unveiled in July 2024 and aims to position the UK as a leader in regulating the booming crypto industry.
The UK's cryptocurrency sector is one of the fastest-growing crypto markets globally, having outpaced Germany and the United States after a decade of strong growth. The rising popularity of cryptocurrencies in the country and their recognition as legitimate assets have led to over 3 million crypto users. These users are estimated to hold more than $3.72 billion worth of digital assets. Additionally, the UK crypto industry generated an estimated $1.9 billion in revenue in 2023, with projections reaching $2.53 billion in 2024.
This exponential growth and market penetration, along with increasing adoption of cryptocurrencies by mainstream businesses in the UK, has intensified calls for regulatory oversight of the sector.
1. What to Expect from the New Crypto Laws
Today, cryptocurrencies impact numerous industries—from powering online banking transactions to supporting online gaming operations. It's no surprise that the UK seeks to establish clear rules for operating in the crypto world to foster a vibrant and secure environment.
At the Innovative Finance Global Summit, Bim Afolami stated that final proposals for the regulatory regime are actively being developed to ensure timely implementation. He added that many crypto asset activities will be brought under regulation for the first time. Key expected provisions include:
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Issuers of stablecoins—cryptocurrencies whose value is pegged to traditional assets or other cryptocurrencies—will face licensing requirements to alleviate concerns about potential financial instability;
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Clarification of the tax treatment of staking, where crypto holders lock up their assets to support transaction validation on blockchain networks, safeguarding consumer rights;
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Stricter scrutiny of buying and selling digital assets on cryptocurrency exchanges to prevent criminal activity within the crypto ecosystem. These platforms may be subject to Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols similar to those in traditional finance;
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Custodial service providers that charge fees for storing users' crypto assets must implement resilient security measures to protect user holdings from cyberattacks and other threats.
The UK Economic Secretary confirmed that the country aims to attract businesses and investors into this fast-growing sector while ensuring consumers are protected from financial risks and fraudulent activities.
2. The Legislative Journey of the UK’s Crypto Ecosystem
According to data from the UK Financial Conduct Authority (FCA), only 42% of UK adults had heard of cryptocurrencies in 2019. By 2022, that figure had risen to 91%. Moreover, in 2022, the UK government expressed its intention to regulate the crypto industry.
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Early 2022—Prime Minister Rishi Sunak announced the government’s plan to modernize the UK’s financial system to support crypto institutions and transform the UK into a leading global financial hub. The focus would be on enabling operations, investment, innovation, and scalability for crypto firms.
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February 2023—In line with the government’s agenda to position the UK as a global financial center, the FCA began consultations with the Bank of England (BoE) on developing a regulatory framework for stablecoins. These consultations followed the directive that the FCA would oversee the UK’s crypto environment, while the BoE would supervise stablecoin issuers whose scale and influence could impact the broader UK financial system.
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July 2023—The UK Law Commission passed four recommendations aimed at comprehensive reform of domestic crypto regulations, potentially paving the way for treating cryptocurrencies and stablecoins as regulated financial activities.
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Twelve months after this historic step, the UK is expected to release the final regulatory framework for crypto companies and digital assets. However, this timeline may not be guaranteed due to the upcoming general election, likely to take place in the second half of 2024.
The Labour Party is currently favored to win the election, but it has expressed skepticism toward crypto regulation. If Labour takes power from the ruling Conservative Party, it could delay or amend the proposed regulations before approval. In such a scenario, the UK crypto industry might suffer the same fate as the US market, where regulatory uncertainty has driven crypto users to relocate to other jurisdictions.
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