UK Crypto Firms Face Regulatory Uncertainty Amid MiCA

Industry executives disagree on the UK’s ambiguous crypto laws, while some think MiCA might lead to a move from the EU to the UK.

Industry insiders claim that the UK’s current regulations must be more stable to provide a viable substitute for businesses looking to escape Europe’s Markets in Crypto-Assets Regulation (MiCA).

According to Sophie Bowler, chief compliance officer at Zodia Custody, a UK-based company, MiCA’s regulations may lead to a “short-term shift” away from the EU and toward the UK.

“There may be a short-term shift to the UK market for firms that are unable or unwilling to meet MiCA’s requirements,” Bowler stated in the Chainalysis 2024 Geography of Cryptocurrency Report.

A move to the UK might not be the solution, even if the companies are open to exploring other markets in the lead-up to MiCA’s deadline, which is anticipated in late 2024. Executives at the crypto risk intelligence company Merkle Science and the UK’s self-regulatory trade group, CryptoUK, agree.

The way the UK regulates cryptocurrencies creates “unpredictability.”

For overseas crypto asset service providers (CASP) and stablecoin issuers, MiCA’s strict regulations present serious obstacles, according to Natalia Latka, director of public policy and regulatory affairs at Merkle Science.

Latka told Cointelegraph that European legislation’s “Brussels effect” might be lessened because of the expense and difficulty of adhering to this legal framework, which could isolate the European market and lead local businesses to think about moving.

Latka acknowledged that jurisdictional transfers are probably the result of onerous MiCA compliance. Still, she questioned whether the UK is a suitable substitute for companies seeking to escape the EU’s crypto rules.

“The UK presents challenges even though it appears to be a close alternative for businesses looking for relief,” she said.

“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.”

According to Latka, the UK’s staged approach to crypto regulation “introduces unpredictability,” citing problems such as the drawn-out registration procedure with the UK’s Financial Conduct Authority.

A less definite jurisdiction?

Su Carpenter, executive director of CryptoUK, echoed Latka’s comments, pointing out that regulatory delays brought on by the July general election and government change continue to impact the current state of affairs in the UK.

According to Carpenter, the UK made significant strides in late 2023 and early 2024 regarding regulatory consultations but has yet to advance in the subsequent implementation phases.

Carpenter said that the new Labour government needs to provide clear guidance or mandate about their attitude to the digital asset market.

“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.”

Carpenter said that the UK’s crypto approach would partially duplicate MiCA since many aspects will need to change to reflect the ongoing evolution of the crypto business. He made this comparison with EU legislation.

She concluded that the UK government has a genuine chance to take advantage of the possible departure from the EU for businesses looking for a more welcoming regulatory environment thanks to Europe’s MiCA.