The UK’s bid to become a global hub for the digital asset sector is slowing down due to political hurdles and regulatory confusion. Jonny Fry, who works in the field of blockchain and global banking, told CoinDesk that bureaucratic delays in the country have seriously delayed the implementation of a comprehensive legal framework in the crypto field. According to Fry, these delays could lead to the UK losing its competitive advantage against centers such as Washington and Brussels.
Incompatibility between regulatory bodies
One of the main problems with crypto regulations in the UK is task sharing and decentralization. The failure to establish clear boundaries between the Exchequer, the Bank of England and the Financial Conduct Authority (FCA) has fragmented the payment and investment spheres. While the private sector expects rapid steps to increase market efficiency, a significant slowness is observed on the public side.
Another issue that Jonny Fry points out is that the country should be concerned not only about the physical separation of crypto companies, but also about the fact that digital asset infrastructure is being developed in other countries. Currently, the Ministry of Finance is dealing with drawing the legal framework, while the FCA is dealing with publicly funded stablecoin projects and the Central Bank is dealing with digital sterling. Fry states that these dispersed approaches create serious uncertainty for businesses.
“Currently, while the Ministry of Finance is creating legal regulations, on the other hand, the FCA is putting publicly issued stablecoins and the Central Bank is putting digital sterling on the agenda. This fragmented approach creates deep operational uncertainty.”
Confusion among regulators is causing confusion not only in companies’ plans but also in the functioning of the currency. In particular, question marks are increasing about how tokenized deposits and digital assets will be adapted to the principle of “unity of money”.
Mini glossary: The FCA (Financial Conduct Authority) is the regulatory authority that oversees financial institutions and markets operating in the United Kingdom. It is responsible for both ensuring consumer protection and overseeing the integrity of the financial system.
Reactions to slow-moving regulations are growing
In this complex environment, some large digital asset companies have chosen to move to countries that offer clearer and faster regulation. Citing the derivatives platform Deribit as an example, Fry stated that the platform could have preferred the UK if legal clarity had been provided that staking transactions would not be seen as collective investment funds. It is estimated that this situation means a tax loss of hundreds of millions of pounds for the British government after Coinbase purchased the platform.
“Perhaps Deribit would have moved to the UK if we had made it clear that staking was not a collective investment scheme.”
Andrew MacKenzie, CEO of sterling-backed stablecoin developer Agant, also emphasized in his statement to CoinDesk that the regulation process is moving in the right direction, but he found the pace inadequate.
The cautious attitude of the Central Bank challenges the private sector
In the news published in the Financial Times last week, it was stated that the cautious steps of the Bank of England caused disappointment in the sector. While companies wanted a rapid integration, the strict measures brought by the Central Bank regarding stablecoins caused a major bottleneck in regulations. FCA, on the other hand, continues to conduct its communication mostly through controlled test environments, amid political pressures and the Central Bank’s monetary policy reservations.
Gradual implementation and future expectations
Matthew Long, who serves as Director of Digital Assets and Payments within the FCA, described the path followed by the regulations as “a comprehensive structure that is built step by step” and stated that applications can be received and companies are supported at this stage.
According to experts, if the UK does not act quickly in line with market conditions, the weight of US dollar-based stablecoins, where liquidity is more flexible, will increase. Without the introduction of a competitive digital pound, it is anticipated that private companies will continue to use US-based stablecoins for their payments.
The new regulatory rules are scheduled to come into force in October 2027. Until this date, uncertainties in the sector are expected to continue to affect companies’ investment and innovation decisions.
