UK government meets crypto exchanges

Several meetings have taken place in Britain since the beginning of the year between the UK Treasury Committee and various crypto companies, in particular some exchanges. 

💥JUST IN: UK Treasury had numerous high-level meetings with Binance, Paxos, Coinbase and Circle in Q1 this year.

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— Bitcoin Archive (@BTC_Archive) July 17, 2022

One such meeting was recently officially confirmed by Binance, which reports that the meeting was part of an investigation into the risks and opportunities associated with cryptocurrencies. The British government would be studying an “appropriate response” to the problems posed by these innovations, together with regulatory bodies.

For example, according to what Binance revealed, the UK Treasury Committee is investigating the possibility that digital currencies could replace fiat money, the effect that cryptocurrencies could have on social inclusion, and whether government and regulators are able to “grasp the opportunities” presented by these innovations. 

To be precise, the Treasury Committee is a cross-party group of regulators whose job is to examine the policy of the Treasury, Revenue, Customs and other government agencies including the Bank of England (BoE) and the Financial Conduct Authority (FCA).

In Europe, Britain is certainly by far one of the most developed countries from a fintech perspective, so it is more than plausible that they are trying not to be left out of this development. Despite this, there are still a number of skeptics about this, including within the central bank. 

Is there no value in crypto for the Bank of England?

A few days ago BoE Deputy Governor Sir Jon Cunliffe described cryptocurrencies as having “no intrinsic value, inherently volatile, very vulnerable to sentiment and prone to collapse”.

However, Cunliffe himself also added that finance always carries inherent risks, and technology can only change the way these risks are managed and distributed, but not eliminate them. 

In fact, he concluded his speech by saying:

“Innovators, alongside regulators and other public authorities, have an interest in the development of appropriate regulation and the management of risk. It is only within such a framework, that they can really flourish and that the benefits of technological change can be secured”.

Therefore, the approach of both the British government and central bank toward cryptocurrencies is entirely possibilistic, as long as there is an appropriate regulatory framework in place. 

The British government has also launched an investigation into DeFi, and in particular into the possibility of taxing profits made from decentralized finance, such as those from cryptocurrency lending and staking. 

In addition, it seems that the Treasury wants to introduce regulation for stablecoins even by the end of the month. 

In Europe on the other hand, competition to become the leading crypto hub is fierce, with Switzerland ahead of everyone at the moment. In order to do so, it is necessary for states to somehow adapt to these innovations with new regulations that limit their risks but without clipping their wings.