Workable crypto regulations for the UK will take two years
A British law firm has said it will take UK regulators two years to draw up new rules for cryptocurrency markets given past precedents.
James Kaufmann, legal director at Reynolds Porter Chamberlain (RPC), said that it likely take around 24 months to introduce the necessary regulations along with the required consultation period.
“Past precedents show it can take years to make relatively minor regulatory changes to the financial regulatory regime,” Kaufmann said.
He cited the example, of the regulation of home reversion plans, which took two and a half years to come into force from the Treasury’s original announcement on 10 May 2004 to 6 November 2006.
A similar time frame for crypto regulation can be expected, Kaufmann adds, because the Treasury will need to:
- Assess which specific activities related to the crypto market need regulating
- Carry out market studies
- Craft proposed regulations and open up to consultation
- Publish any changes, post-consultation, and set an implementation date
Kaufmann said: “Even if MP’s latest proposals were fast tracked, it could still take years for regulations to cover the UK cryptocurrency market that treads the middle ground between protecting retail participants and allowing the UK’s cryptocurrency market to thrive.”
Any such move would also result in a substantial expansion in the role and remit of the Financial Conduct Authority (FCA) and raises questions over whether the country’s chief financial regulator can:
- Provide the capacity and funding to handle such an expansion
- Find the appropriate expertise to handle such a technically complex market as cryptocurrencies
- Prepare for how crypto markets might react in response to the introduction of regulations
Benefits of being first
Bearing such questions in mind, RPC noted – in agreement with a Treasury Committee report – that the first jurisdiction to implement a workable bespoke regulatory regime for cryptocurrencies may gain a head start in establishing the markets needed to freely trade digital assets.
Kaufmann concluded: “The race to establish a workable and regulated regime for cryptocurrencies is surely worth winning as the creation of a cryptocurrency trading hub may have positive knock-on effects for businesses serving these markets, such as brokers, investment banks, and custodians as well as a potential increase in tax revenues for authorities.”