British PM to revive his cryptocurrency ambitions

UK cryptocurrency firms and investors have high hopes that new Prime Minister Rishi Sunak could turn around Britain’s fading crypto aspirations.

The new U.K. leader, who was finance minister in former PM Boris Johnson’s government, faces a daunting to-do list, which includes undoing the economic havoc wreaked by his predecessor Liz Truss. Crypto isn’t exactly high up on his priority list, but industry insiders say there’s reason to be optimistic.

“The feeling among entrepreneurs is one of relief,” said Christian Faes, co-founder of digital lending startup LendInvest. “There’s a feeling that we finally have someone sensible in Number 10, after the arrogance and incompetence of Liz Truss and [ex-Finance Minister] Kwasi Kwarteng almost crashed the U.K. economy.”

“Rishi sees the opportunity and potential that crypto has and wants the U.K. to be a leader in it,” Faes, who also chairs the Fintech Founders network, added.

Sunak, a former Goldman Sachs analyst, has on several occasions expressed a positive attitude toward crypto. As the minister in charge of Britain’s finances, he outlined a grand plan to make the country a global crypto hub in April. That included bringing stablecoins within the regulatory parameters and getting the Royal Mint, the official U.K. coin maker, to launch a non-fungible token.

At a drinks reception organised by the venture capital firm Index Ventures in June, Sunak said he was “determined” to make the U.K. “the jurisdiction of choice for crypto and blockchain technology”.

But after weeks of political instability, crypto firms and investors are wondering what he’ll do to boost the market, which is licking its wounds after a punishing few months for digital asset prices and a slew of corporate bankruptcies.

‘Uncharacteristically disorganized’

Before Sunak’s appointment as PM, confidence in the U.K.’s position in the global crypto market had been waning.

In a survey of 300 British fintech founders, only 9% believe it’s leading the way on crypto. Nearly 20% of founders thought the regulator was “actively signalling” the U.K. wasn’t the place to start a crypto company, according to the survey by Fintech Founders.

The Financial Conduct Authority has been criticised for being slow to approve licenses for crypto firms, an issue that has caused several companies to wind down and set up shop elsewhere in Europe. Fintech app Revolut only recently won a license for its crypto entity after numerous extensions to the deadline for finalizing approvals.

For its part, the FCA says a high number of applicants haven’t met its standards on preventing money laundering.

“I find that, sadly, this is yet another example of the U.K. acting very uncharacteristically disorganised,” Matteo Perruccio, president of international at crypto-focused fund manager Wave Financial, told CNBC.

Whereas Switzerland is an example of a country which has been “brilliant” in attracting crypto exchange-traded products, or ETPs, among other products, Perruccio said.

Yet the U.K. is home to a fairly active crypto market. According to data from Chainalysis, $233 billion in digital assets changed hands from July 2021 to June 2022. It didn’t grow as much as Germany, though, where on-chain activity was up 47% year over year.

As London looks to compete with EU financial hubs after Brexit, crypto could be a way for it to improve its chances, industry insiders say.

“There is an opportunity to provide clarity to the industry and allow it to play its role in achieving their mandate to encourage businesses to invest, to innovate, and to create jobs in the U.K.,” Jordan Wain, U.K. public policy lead at Chainalysis, told CNBC.