The U.K.'s Financial Conduct Authority (FCA) unveiled its cryptocurrency regulatory framework this week, winning early praise for taking an internationally connected approach, but industry participants said significant questions remain before Britain can establish itself as a global crypto hub.
The FCA's package of rules creates a framework that preserves access to global liquidity through overseas trading venues and allows non-U.K.-issued stablecoins to circulate, various industry participants have highlighted.
"The publication of the FCA's final crypto rules is a major milestone for regulatory clarity and a strong outcome for the U.K.'s competitiveness in digital asset innovation," Katie Harries, Coinbase's head of policy for Europe, said in a Telegram message.
Also, FCA's new measures around global liquidity and non-domestic stablecoins contrast with what many industry participants view as the more protectionist approach set out by the European Union's (EU) Markets in Crypto-Assets (MiCA) regulation, which effectively encouraged firms to ring-fence European operations and liquidity.
Particularly, FCA's new Qualifying Cryptoasset Trading Platform (QCATP) model should allow overseas exchanges to serve U.K. customers through locally authorized branches connected to existing global trading infrastructure, according to Christopher Collins, a financial markets and regulation partner at Katten Muchin Rosenman.
"The benefit of such an approach is allowing access for U.K. customers to established global liquidity in the offshore trading platform, rather than having a ring-fenced U.K. liquidity pool, which should mean better pricing and outcomes for U.K. customers," Collins said in an emailed comment.
However, Collins warned that the framework currently leaves one critical question unanswered.
The FCA has said overseas branches will only be authorized where their home jurisdiction provides "comparable levels of regulatory protection." But it has yet to specify which jurisdictions meet that standard.
"That isn't enough clarity for firms to build a business model," Collins said, arguing that firms need greater certainty before investing in U.K. operations.
Harries also highlighted DeFi as an unresolved issue, warning that earlier proposals would effectively prevent centralized platforms from offering access to decentralized finance applications.
"The U.K.'s future approach to DeFi will be critical," she said, arguing such restrictions would leave it out of step with jurisdictions such as the U.S., where policymakers are exploring DeFi as part of broader tokenization strategies.
Beyond policy questions, firms face a formidable authorization process.
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