While some industry execs anticipate MiCA will cause a shift from the EU to the UK, others are concerned about the UK’s unclear crypto regulations.
According to industry experts, cryptocurrency regulation in the United Kingdom remains too uncertain to serve as a strong alternative for companies looking to escape Europe’s upcoming Markets in Crypto-Assets Regulation (MiCA).
Sophie Bowler, chief compliance officer at Zodia Custody, predicted that MiCA’s stringent requirements could lead to a “short-term shift” of firms from the European Union to the UK.
She stated in the Chainalysis 2024 Geography of Cryptocurrency Report, “For firms that are unable or unwilling to meet MiCA’s requirements, there may be a short-term shift to the UK market.”
However, while some crypto companies may explore other markets ahead of MiCA’s deadline in late 2024, a move to the UK might not be the best solution.
Executives from CryptoUK, a self-regulatory trade group, and Merkle Science, a crypto risk intelligence firm, raised doubts about the UK’s suitability as an alternative.
UK’s Crypto Regulation Creates “Unpredictability”
Natalia Latka, director of public policy and regulatory affairs at Merkle Science, acknowledged that MiCA’s regulations present significant obstacles for foreign crypto asset service providers (CASPs) and stablecoin issuers.
She explained, “The cost and complexity of complying with this regulatory framework may isolate the European market and prompt local companies to consider relocating, potentially diminishing the ‘Brussels effect’ of European regulation.”
While some businesses might shift due to MiCA’s burdensome compliance demands, Latka questioned whether the UK is a viable option.
“The UK, while seeming like a nearby alternative for businesses seeking relief, also poses challenges,” she said, adding that “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.”
Latka also highlighted that the UK’s phased regulatory approach “introduces unpredictability,” pointing to challenges like the lengthy registration process with the UK’s Financial Conduct Authority (FCA).
A Jurisdiction with Less Clarity?
Su Carpenter, executive director of CryptoUK, echoed Latka’s concerns, noting that the general election and a government change in July have delayed the UK’s regulatory progress.
Carpenter explained that while there was significant progress in 2023 and early 2024, the process has since stalled.
“There has been no clear direction or remit from the new Labour government in relation to their approach to the digital asset sector,” Carpenter told Cointelegraph. She added, “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 further noted that the UK’s regulatory approach would likely differ from MiCA, as it would need to adapt to the rapid evolution of the crypto industry.
She concluded that while MiCA presents a real opportunity for the UK government, there is still uncertainty about whether it will attract companies seeking a more favorable regulatory environment.
