Industry Concerns Over Regulatory Impact
While the adoption of cryptocurrency and blockchain technology is ever-rising, leaders within the industry are warning that the UK’s strict rules could hold back innovation. Kraken’s Co-CEO Arjun Sethi said these regulations, meant to protect everyday investors, make transactions slower and block access to many crypto products.
Speaking to the Financial Times, Sethi said, ‘In the UK today, if you go to any crypto website, including Kraken’s, you see the equivalent to a cigarette box [warning] — ‘use this and you’re going to die’.” He added that all the extra steps and warnings make it harder for users to move their money quickly and smoothly.
Sethi emphasized that while consumer protection is important, over-regulation could deter investors from participating in crypto entirely. He noted that Kraken users in the UK cannot access about 75% of the products available to American clients, such as DeFi lending and yield opportunities. “Because of the speed at which they have to do the transaction, it’s worse for consumers,” he added.
Kraken, founded in 2011 and among the top 15 global exchanges by trading volume, also runs a tokenized stock platform. However, the firm will avoid tokenizing private company shares, a strategy Robinhood recently pursued to mixed reception.
Regulatory Hurdles in the UK
At the end of 2023, the Financial Conduct Authority (FCA) introduced new rules for crypto companies. They now have to clearly warn users about risks, stop offering incentives to invest, and make sure people actually understand what they’re buying.
Some experts say these rules are too strict and slow down the market. Bill Hughes, a Senior Advisor at Consensys, highlighted that the UK’s approach has slowed the sector and allowed the US to become a more attractive crypto hub. “While in the US there is a real desire to give blockchain technology room to breathe, the tone in the UK is very different, focusing on risks and uncertainties,” Hughes said during the Zebu Live event in London.
The FCA defended its stance, noting that questions about crypto investments are meant to ensure informed decision-making. “Some consumers may make an informed decision that investing in crypto is not right for them — that is our rules working as intended,” the regulator said. However, executives at Zebu Live in London warned that overly cautious policies risk pushing companies abroad.
Shifts in UK Crypto Infrastructure
Despite criticism, the UK is slowly modernizing its crypto framework. The FCA recently approved London-based ClearToken to launch CT Settle, a regulated settlement service for digital assets. The system is designed to make trading safer and quicker by letting institutions settle crypto, stablecoins, and traditional money all at once.
Additionally, the Bank of England now allows stablecoin companies to invest up to 60% of their backing in government bonds, relaxing earlier limits that slowed growth. However, caps on individual and business holdings remain, with limits of £20,000 for individuals and £10 million for companies.
Global investment firms are also increasing access to crypto in the UK. BlackRock recently launched its iShares Bitcoin ETF on the London Stock Exchange, letting everyday investors buy Bitcoin safely through a regulated platform.
Jane Sloan, BlackRock’s EMEA head, said, “Built on institutional-grade infrastructure, [the product] enables UK investors to gain exposure to bitcoin with the confidence of robust custody and regulatory oversight.” Hence, institutional entry may help balance regulatory caution with market demand.
The UK’s crypto rules try to keep investors safe, but they might slow down new ideas and opportunities. Finding the right balance will decide if Britain stays competitive in crypto.