How will the UK's cryptocurrency policy change with the Labour Party in power?

Author: Mia, ChainCatcher

Editor: Marco, ChainCatcher

On July 4th, the dust settled on the UK elections, with the Labour Party winning a decisive victory in the House of Commons, securing 412 seats and leader Keir Starmer taking residence at 10 Downing Street. This marks the most lopsided electoral victory in Labour's history, ending 14 years of Conservative rule. This historic election result undoubtedly brings significant changes to the political landscape in the UK and leaves many questions for domestic and international observers.

Former UK Prime Minister Rishi Sunak had called for cryptocurrencies to be part of his policy and promised that the UK would embrace crypto technology, aiming to make the UK a "global cryptocurrency hub." Will the new government continue the existing policies to promote innovation and growth in the crypto industry?

Currently, the Labour Party has been tight-lipped about how Starmer's government will handle the regulation and growth of the industry, leaving the future of cryptocurrencies, blockchain, and related verticals shrouded in uncertainty.

The New UK Government's Attitude Towards Crypto

As a traditional global financial center, the City of London has always been a bellwether for the financial industry worldwide, and this holds true for the crypto sector as well.

However, during the Conservative government's tenure, led by former Prime Minister Sunak, the UK government expressed a desire to make the UK a cryptocurrency hub and consulted on future plans, including stablecoin regulations. Additionally, outgoing Economic Secretary to the Treasury Bim Afolami had attended multiple fintech conferences and promised that the government would issue secondary legislation for stablecoins.

In contrast to the Conservative Party, which had a clear stance on cryptocurrencies during its 14 years in power, the newly elected Labour Party is focusing on the economy, policing, and the National Health Service.

Although Prime Minister Starmer's attitude towards cryptocurrencies remains somewhat ambiguous, his shadow cabinet's Treasury spokesperson Rachel Reeves (who will take over as Treasury Secretary) has shown an open attitude towards the tech industry.

Shadow cabinet minister Tulip Siddiq stated, "If Labour wins, we will transform the UK into a global center for tokenized assets."

Moreover, the Labour Party has publicly stated its support for the Bank of England's digital pound initiative.

The CEO of financial services giant DeVere Group stated, "The cornerstone of establishing the UK as a global cryptocurrency hub lies in creating a clear and comprehensive regulatory framework." London has always been a leading global financial center, and "by embracing cryptocurrencies and blockchain technology, Starmer can elevate London's status. The combination of London's strong financial infrastructure and progressive crypto regulation can attract international businesses and investors."

The UK Government's Next Steps on Crypto Policy Remain Unclear

In January of this year, the Labour Party released a financial services plan that included making the UK a center for security tokenization by "advancing the clarification of tokenization-related laws." Although the document did not mention "cryptocurrency" or "blockchain," it did indicate that "embracing security tokenization and central bank digital currencies" is part of the party's "vision" for the UK.

Brian Rose, founder of the Crypto and DeFi Academy, believes that the incoming Treasury Secretary Rachel Reeves' open attitude towards the tech industry is encouraging, but he also expressed concern that "rumors suggest the Labour Party plans to address security tokenization and issue a CBDC as part of its financial policy. I hope she can work with the cryptocurrency community to develop market-leading policies rather than launching poorly conceived plans without any consultation."

Regarding the Labour Party's ascendance, members of the UK crypto community believe there is still much work to be done, including implementing necessary regulations identified by the previous government.

Jordan Wain, UK Policy Director at Chainalysis, expressed optimism, stating that he does not believe the party change will alter the UK's previous crypto trajectory. "A lot of the really important work has already been done, but not by the parties themselves; it has been done by the UK's Financial Conduct Authority (FCA), which is responsible for making the laws. They will not erase all this hard work; it will not go to waste."

Bivu Das, Managing Director of Kraken UK, shares a similar view, stating, "Clearly, the political landscape in the UK has changed, but for cryptocurrencies, we believe everything will continue as usual. The new government has the opportunity to continue driving innovation and growth in this emerging asset class and solidify the UK's position as a leading jurisdiction for blockchain innovation."

Keld van Schreven, co-founder of UK digital asset investment firm KR1, believes that this party transition comes at a "critical moment" for the crypto industry. "Significant progress has been made in establishing a regulatory framework, but more work is needed to make the UK a global cryptocurrency hub."

Additionally, the UK crypto lobbying group Crypto UK has stated that it has established contact with Labour government members and is urging the party to prioritize clear and proactive policy-making to fully unlock the potential of the crypto industry.

Most crypto experts believe that despite the political shift, the UK's progress in the cryptocurrency and blockchain sectors will not be interrupted; rather, it is expected to continue to develop under the new government's influence. While the Labour Party's open attitude towards the tech industry is welcomed, concerns about the implementation of specific policies remain.

Before the election, the UK government had anticipated launching a regulatory framework for cryptocurrencies and payment stablecoins in July. However, with the House of Commons going on recess after the election, most experts suggest that this plan may be delayed.

Currently, the Labour Party has not made any significant decisions regarding the future of cryptocurrencies, nor has it taken a hard stance on related technologies like blockchain.

The Importance of Crypto Issues in the Election Grows

From the approval of BTC spot ETFs to the implementation of crypto regulations in various regions, the crypto industry is evolving, and cryptocurrencies are gradually entering the public eye, influencing the global economy. The "attitude towards crypto" has also begun to become a bargaining chip in international politics.

In the upcoming 2024 US elections, the role of crypto assets has undergone a significant transformation, shifting from initial resistance during Trump's presidency to Trump himself openly expressing support. This change not only highlights the growing importance of crypto assets on the international political stage but also reflects the increasing significance of this field in American public discourse. The rise of cryptocurrencies in electoral competition is based on their becoming one of the focal points of public attention.

This shift has also profoundly influenced the policy positions of current US President Biden and his administration. The Biden administration has begun to show more affinity towards crypto assets, recognizing their potential value in the economic system and openly expressing a willingness to accept cryptocurrency donations. This change undoubtedly paves the way for further integration of cryptocurrencies into the political and economic landscape in the US.

Michael Novogratz, founder of Galaxy Digital, stated, "The political acceptance of cryptocurrencies is growing, which means that in the long run, who wins may not matter."

Previously, regarding the SEC's recent mild actions in the crypto space, Hong Kong blockchain lawyer Wu Wenqian noted that "there seems to be a sign of a shift in the SEC's regulatory attitude." He also maintains an optimistic view on the Labour Party's ascendance, predicting that "the stablecoin regulations and tokenization regulations proposed during the Conservative Party's tenure may still be advanced in the future, although the specific timeline is currently uncertain."

Wu Wenqian told ChainCatcher that this year, the UK's regulatory attitude towards the crypto industry has indeed been quite stringent, "including the promotional code released last October, which led many exchanges to exit the UK market, including Bybit and Binance. The Apple App Store has also required crypto-related apps to be removed from the UK market."

Regarding the approval process, Wu pointed out that the UK's Financial Conduct Authority (FCA) has been relatively slow and inefficient in approving cryptocurrency registration companies. This situation undoubtedly increases the difficulty and uncertainty for new enterprises entering the market, posing a certain obstacle to the normal development of the crypto industry. He expressed hope that the Labour Party's arrival could change the stringent and cautious attitude towards the crypto industry, allowing it to develop normally.