Cautious Optimism for UK Crypto Investors

regulations are concerned. Bloomberg reporter Emily Nicole sees cautious optimism among investors about the UK's approach to crypto regulation. She joins me, now, Emily, thank you so much for joining us today. Tell our listeners a little bit more about the frankly fascinating landscape for to regulation in the UK, Like what what is going on and as we like to see in the US on the other side of the pond. I think it's one of the more complex

regulatory landscapes that we've got going so far. That may just be my perspective because I cover it, so I know what's going on, um, But it's one where we've had a lot of ups and downs and definitely a lot of different players in the mix. So at the moment crypto is largely an unregulated space. In the UK. We have one main financial regulator here, the Financial Conduct Authority, and then there's obviously also the government as well that

provides some some guidance there. Um. The regulator has done its best, I guess they would say to regulate the crypto space, trying to provide frameworks for crypto companies in terms of money laundering regulations um and giving them kind of space to innovate, while also providing a somewhat firm hand. But mostly that has amounted to just continually warning consumers that they could lose all their money if they invest anything in cryptocurrencies, and not so much in terms of

providing consumer protections or any recourse there for investors. So you would consider that more on the framework of consumer advisory rather than consumer protection. You would say, yes, for sure, there's there's definitely no real option for consumers if they lose money in crypto at the moment. There's no insurance schemes, there's no official licensing for crypto companies. UM, So if you're an investor in the UK in crypto, it's as

good as anywhere else pretty much. Well, I do want to ask you about that, because you know, one of the things, especially after Brexit, that seemed to be or I say, seemed that that looked like it might be true, was that the UK was trying to set itself up as a hub for crypto. Right that and based on, for example, it's previous regulatory history of being a hub

for fintech. Fintech short full financial technology refers to the use of digital technology, are replacement enhance traditional financial services. So are you saying that that is is or isn't happening from your perspective, I think from from the perspective of people I've talked to in the industry, the UK, as you said, it was known as a fintech powerhouse. It still is. It's definitely the part of the tech sector here that attracts the most investment every year. Um.

But that hasn't necessarily extended itself over to crypto. Brexit is one part of that. A lot of people thought, you know, the idea of Brexit was that the UK would get regulatory freedom from the EU will be able to write its own rules. But actually, over the last few years since we voted to leave in Brexit has meant that the Financial Conduct Authority and the government have had far too much on their plate to really even

think about crypto. So while fintech was in its earliest days, they were able to pay a lot of attention to it, considered the best way to help in industry innovate and create new technologies while keeping everything kind of under wraps and supervised. Um, those early years for crypto passed by

and there wasn't really much attention paid to it at all. So, you know, in the early days of fintech, and when we talk about that, we're talking about companies like PayPal or online banks or you know, other folks that are putting the finances and technology as it were. Whereas right now, what are the some of the equivalent kinds of companies in crypto operating in the UK that perhaps we're expecting to have more of a sort of a friendly or

accommodative regime. So there are obviously a few companies that would style themselves as crypto banks. Um, there are some fintech companies in the UK that offer banking services and crypto trading on the side, like Revolute Um, and actually offering the crypto services has not been much of a help to them when trying to get an official banking license, because it's something that the regulators are still aren't comfortable saying yes, okay, that's a part of your business that

will accept or assesss fit and proper um. I think the area where crypto companies have mostly been over overseen by the regulator here is um in the world of exchanges, but specifically limited to kind of asset management or brokerage.

So earlier companies in this space, like u Toro for example, had a digital brokerage license, which meant that they could offer you know, stock trading, and they kind of got in that way a bit like a robin Hood kind of model, and when they started offering crypto on the side,

it was considered separate. But when when it came time to start seeking guidance from the FCO over anti money laundering rules or any of the other places that they've started to look at in crypto, they already had that relationship and that rapport established, which definitely helped them UM, where other crypto companies got no help at all. Let's take a moment to listen to the UK Secretary to

the Treasury, John Glenn. He was recently talking to Bloomberg Technology about how the government in the UK is thinking about these regulations as it relates to crypto. Let's listen. Well, I think we've got to accept that this is going to be a great opportunity. We've got to regulate to

innovate those so we've gripped it in the UK. I made a each last Monday and I announced the number of interventions we want to bring industry together with our regulator, with government so we can work out the best steps to take this interesting phenomena forward because it has many applications both for financial services and to the wider economy. And so I'm excited about that and I'm pleased that we're able to get that engagement with industry both here

and in London in order to drive it forward. Well, you know, to your point um, so much of regulation is really about relationships. Who you know, who you can successfully lobby, And certainly various of these companies have been finding because they haven't been successful with their efforts or they're not getting the attention and they think they deserve They're looking to other financial centers. Dubai is a huge one for crypto. You know, they have some very attractive

propositions to potential crypto folks. Switzerland is always always on folkus as radar. What is it about these financial centers that are causing people to reconsider their commitment to the UK. One thing that the UK did do that others haven't on cryptoregulation was explicitly banned retail investors from accessing crypto derivatives products. Now, if you look at somewhere like Europe, crypto derivatives have been a very big part of the

ecosystem for quite a few years. They've been around since about twenty fifteen, and as we know now with the with the US fight for a Bitcoin ETF, it's definitely touted as the way that institutional investors will get access to crypto because they can use listed products that will track the price of something like bitcoin without actually having

to hold it. When the UK decided to ban those products retail investors, it also inadvertently created the environment where clearing houses weren't that comfortable with listing them, even for just professionals. UM and it made life difficult for for companies like you Toro, for example, who offered them already. And that's one area where Europe has been able to pull ahead. Switzerland is one of the biggest hubs for these exchange shaded products on crypto. It's got a lot

of space there. It's also got an area like Cirque, which is known as Crypto Valley um. And so when this year when companies were struggling to get permissions from the f c A to remain operating in the UK, they had to meet certain anti money laundering requirements and more than crypto companies that applied struggled to do that.

They basically faced the decision of downing tools and stopping the business or moving the part of the business that would be considered under that regulated part of crypto abroad, and Switzerland was one of the key cups, alongside places like Croatia and Dubai. As you mentioned, got it now downing tools throwing toys out of the prom You know, various folks have had perspectives on if this was a a commensurate response to moves by by the Sea and

Treasury and others. But you know, you you in the course of your reporting, you talked to a lot of the folks in the market, what specifically are they saying, would would the f C or the Treasury have to be doing or have to be trying harder on to recreate it that impression that the UK is an attractive place for these kinds of companies, particularly ones doing the more complicated products. So in the last few months the Treasury announced that it wants to be a global crypto hub,

which I think was definitely the first start. A lot of crypto companies that I spoke to said, you know, even if we find other parts of crypto regulation the UK incredibly difficult to deal with, you're only ever going to take a message like that from the Treasury as a positive. So that that was kind of the start.

But since then there have been a lot of moves to basically get the ball rolling on putting actual regulation in place for crypto and one of those was a Crypto Sprint by the f C A which is like a two day event where lots of crypto executives but also interested parties in the space like lawyers and accountants and consultants are all invited into a room with top staff from the FCA to talk about crypto and what it is that they need from the regulator and vice versa.

Um topics that they discussed their according to some of the people who went, are things like, you know, whether there is already kind of de facto crypto regulation in place that the exchanges are having to be the guardians of because they act as almost the gatekeepers to the industry and deciding which projects to this and therefore which

tokens consumers get access to. They also were very concerned about custody and whether the essay wants to regulate that that's something that's already regulated in countries like Germany um. And they were very concerned about stable coins as well, particularly in the context of terrorist collapse, and whether regulators should demand more transparency over which assets or algorithms are

backing slash supporting these coins. Well, Emily, thank you for giving us a lay of the land of that digital or hopefully digital landscape in the UK as it relates to crypto regulation. Any kind of closing teakaways for someone who is trying to learn more about what they should understand about crypto, and I think regulation is you know,

while some people would say it's boring. I think it's the key thing to pay attention to here because the crypto investor market is large, stable, it grows in ebbs and flows like anywhere else. Um. But regulation is the place where the UK is really trying to stand out or be different, and over the next twelve months is

when there will kind of be a calling card. We spoke to the former Chancellor Philip Hammond back in January who kind of said if the if the UK doesn't get ahead in crypto or just even figure out what it's doing by the end of this year, there will be no coming back from that. UM. So definitely the next twelve months are very crucial on that slightly foreboarding note, Emily, thank you very much for joining us today. Really appreciate

having you here. You can find more of Emily Nicole's reporting on the Bloomberg Terminal, on Bloomberg dot com and on Twitter at Emily J. Nicole. That's n I C O L L E. We'll be right back for a look at what makes investors in the UK crypto market excited and maybe a little bit nervous. So what exactly are UK investors in the digital asset landscape encouraged by these days and what are they wary of? A regulatory

framework for cryptocurrencies is beginning to take shape. I think what we're seeing effectively the opportunity of leaving away from traditional kind of transition into how can we create legislation for what we want to do kind of going forward. That's Blair Holiday, the UK head of the cryptocurrency exchange Gemini. Blair joins us now. Blair, so good to have you. Thank you for joining us today. Absolute a lot it

to be here, thank you. So first I'm going to ask you are the UK head of Gemini, which is a crypto exchange. Can you say a little bit more about what it is that you and Gemini do? Exactly absolutely so. Gemini is a crypto exchange and custodian. We are founded in the US have We've been in the UK for about two years now, where a one of the few firms that have an f C a crypto

asset registration. We're also authorized as any money institutions, so effectively we enable customers to buy, sell, and still crypto

on our platform. And so you mentioned both retail and institutional, which means you have like lots of people who regulate you, I would imagine given the variety of customer bases that you have, can you say a little bit more about what you think the regulatory landscape in the UK is like, especially post Brexit as it relates to crypto companies like the one you are at, you know, in terms of the opportunities kind of coming further down the line, the UK about a month or so ago, through John Glenn

announced it's intent to make the UK a global crypto hub, and on the back of that the the f C a ouncer f C a crypto sprint, and then Brexit obviously has occurred, and now it's a period of time that has effectively traveled whereby the UK it's kind of effectively moved further down. It's transition out of the EU into a situation action work and start to develop more of its its legislation, and crypto being an obvious one

for them to get into. So I think we're incredibly exciting time for legislation in the UK, specifically in the in the crypto space. So to your point about the landscape that you want to see, what are some specific things that you might be hoping will come out of that sprint? Well, I think clarity. I think clarity and nuance are those things in contradiction. Okay, So what I mean by that is that I think there's a kind of a recognition that the framework is there when it

comes to regulation in the UK. The f c A is a principle's plans to regulated and those principles can certainly be adopted in a wide ranging different areas of financial services. So I think what we'll you know, what we'd like to see is the opportunity to crypto has to expand and have some of those principles kind of adapted and introduce into the into kind of a more fuse of regulation requiring or enabling firms to seek regulatory approval within the UK. And that doesn't mean it needs

to be easy. We understand that the amail process of these administration process was challenging and sets a high bar, and we support that and we you know, we welcome that. Gemini is an interesting position because, as you mentioned, started in the US, is now operating the UK has a lot of visibility into the European landscape. Is there anything about the fact that no two countries or areas seem to have the same approach to crypto that makes your

life more complicated. What we've definitely kind of seen from the look from the UK, the US and the U, there is definitely a desire for agile regulation. All of us the working crypto understand how quickly it can change and having having legislation planned without kind of having the ability to adjust that will be problematic in this environment because it was a quick moving environment. So look, we're

certainly excited by the regulatory landscape across the board. And just as a kind of a closing thought, what do you think is the biggest current selling point that UK regulators have, Like nothing else changes that, you know, we're not talking about future regulations. Why are people there right now? Talent? The UK has a terrific level of talent. It's a traditional hub for financial services. It's also an incredibly versioning

environment for fintech. The UK has, for example, prior to breakfit, had more email institutions than the rest of the combined. So that talent in fintech is there. The talent in traditional finances there, so there's a tremendous opportunity in terms of talent to be acquired by crypto firms. We've seen that with our own hire, and we've seen incredible talent

from a variety of different industries come on board. As well as that, you also have a government that is very much kind of peddling towards a pro crypto stance, So the opportunities from the UK for crypto have never been bright. Well. On that unusually positive notes, I gotta say thank you again. I appreciate you taking the time to be here. Thank you very much for a pot of me. On the next episode of Bloomberg Crypto. Have you ever heard the saying everything is bigger in Texas?

The same applies to mining bitcoin in the state. The States of Texas is flush with bitcoin miners, including the city of Fort Worth that started a small mining operation out of its city hall. Tomorrow, I'll talk with Bloomberg report to Mike Smith about what makes the state so attractive to crypto enthusiasts, and you'll hear from Lee bratcha head of the Texas Blockchain Council, who will share more

about that partnership with the City of Fort Worth. I'm Stacy Marie Ishmael, and this is Bloomberg Crypto, a daily podcast from Bloomberg and I Heart Radio for more shows from I Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts. Email your questions, comments or suggestions to Crypto at bloomberg dot net. Follow us on Twitter We're at Crypto. The supervising producer and editor of this episode is Vicky Verglina. Our producer is

Mohammed Farouk. Zan Abdiki is our associate producer. Desk to wander At is our engineer. Original music by Leo Sidron. Bloomberg's head of Podcasts is Francesco Levi