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While some industry execs believe that MiCA could trigger a shift from the EU to the UK, others question the UK’s unclear crypto regulations.
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The state of cryptocurrency regulation in the United Kingdom is not certain enough to offer a good alternative for companies seeking relief from Europe’s Markets in Crypto-Assets Regulation (MiCA), according to industry insiders.
Sophie Bowler, chief compliance officer at UK-based Zodia Custody, predicted that MiCA’s requirements could trigger a “short-term shift” from the European Union to the UK.
“For firms that are unable or unwilling to meet MiCA’s requirements, there may be a short-term shift to the UK market,” Bowler declared in the Chainalysis’ 2024 Geography of Cryptocurrency Report.
While crypto companies might indeed be willing to seek alternative markets in the run-up to MiCA’s deadline expected in late 2024, a potential shift to the UK might not be the answer. This is according to executives at the UK’s self-regulatory trade association, CryptoUK, and crypto risk intelligence firm Merkle Science.
UK’s approach to crypto regulation introduces “unpredictability”
According to Natalia Latka, director of public policy and regulatory affairs at Merkle Science, MiCA’s stringent requirements pose significant challenges for foreign crypto asset service providers (CASP) and stablecoin issuers.
“The cost and complexity of complying with this regulatory framework may isolate the European market and prompt local companies to consider relocating, potentially diminishing the ‘Brussels effect’ of European regulation,” Latka told Cointelegraph.
While admitting that jurisdictional shifts are likely due to burdensome compliance with MiCA, Latka questioned whether the UK is a good alternative for businesses seeking relief from the EU’s crypto regulations.
“The UK, while seeming like a nearby alternative for businesses seeking relief, also poses challenges,” she stated, adding:
“The UK may not offer the regulatory certainty or operational ease that some expect compared to MiCAR, making it a less ideal alternative for crypto asset service providers seeking a predictable legal environment.”
Latka also opined that the UK’s phased approach to crypto regulation “introduces unpredictability,” highlighting issues like the lengthy registration process with the UK’s Financial Conduct Authority.
A jurisdiction with less clarity?
Su Carpenter, executive director of CryptoUK, echoed Latka’s remarks, noting that the current situation in the UK is still affected by regulatory delays caused by the general election and the change of government in July.
Carpenter mentioned that the UK saw substantial progress in terms of regulatory consultations in late 2023 and early 2024 but hasn’t progressed for the next stages of implementation.
Related: UK’s finance watchdog defends ‘too tough’ crypto stance
“There has been no clear direction or remit from the new Labour government in relation to their approach to the digital asset sector,” Carpenter told Cointelegraph, adding:
“With the uncertainty as to how the regulatory framework in the UK will be implemented, we would be surprised to see organizations take a decision to move to a jurisdiction with less clarity — given the cost and resource it would require to do this on a short term basis.”
Comparing the UK’s crypto approach to regulations in the EU, Carpenter suggested that the UK’s crypto approach will not be a full-scale replication of MiCA as many areas will need to evolve to reflect the constant evolution of the crypto industry.
She concluded that Europe’s MiCA introduces a real opportunity for the UK government to exploit the potential shift from the EU for companies seeking a more hospitable regulatory environment.
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This article first appeared at Cointelegraph.com News
