UK Trends and Developments Contributed by: James Burnie, Kathryn Dodds, Olga Antonova and Holly Joseph, gunnercooke llp
business perspective, the consequence can be seen in terms of creating “pay to play” element to entering different jurisdictions, as the potential client base that can be accessed needs to be weighed against the cost of entry. The size of population and its enthusiasm to participate in crypto-assets becomes a factor in this respect, as there will be more enthusiasm to pay to enter a jurisdiction if the result is access to a larger business opportunity. It will also be interesting to see how the UK pri - oritises its approach to regulation compared to other jurisdictions. For example, selling unregu - lated crypto-assets that are NFTs into the UK from abroad generally falls outside of regulation, whereas NFTs are regulated in the EU. Converse - ly, derivatives in unregulated crypto-asset such as bitcoin are banned in the UK, but may not be banned in the EU. The likely consequence of this is that certain businesses will be best placed by starting with servicing those populations where a lighter approach applies, and then expanding, and this could have an impact on the geographi - cal concentration of different businesses. The UK: a brave new world The microcosm of crypto-asset regulation delin - eates various insights into the UK’s positioning of itself. Firstly, it is clear that the UK can move quickly. This can be both an advantage and a disadvan - tage – for example, the UK was able to front-run European initiatives to regulate crypto-assets
by implementing the MLRs. However, this could arguably be seen as a cost, as certain EU coun - tries were able to enjoy the benefits of short- term influx of crypto-asset firms looking for a lighter-touch regime. On the other hand, it also means that the UK can relatively quickly course- correct, and so for example the MLRs registra - tion regime will soon be replaced with a more traditional authorisations regime that is more fit for purpose – this is a lot more challenging in a model where 27 different members states have to agree and implement a change of approach. Secondly, the UK can operate with freedom, which again can be either a blessing or a curse. A particular contention here is whether the UK seeks to position itself as a low regulation juris - diction or one that is “gold plated” , meaning that it has a particularly onerous regime with a view to firms in the UK therefore being perceived as being “gold standard” . This is likely to be an area of intense debate over the next few years, against a context of commercial reality, which is that firms will consider the UK against other jurisdictions, meaning that there is competition to make the UK an attractive place to do busi - ness, in terms of the benefits received from the costs of accessing the UK market. The one thing that is clear, is that UK lawmakers and regulators have greater power than before to shape the UK framework, and how they exercise this responsibility will be a key factor in the UK’s future as a potential hub for fintech.
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