Coinbase-initiated Stand With Crypto outlines policy recommendations ahead of UK election

Stand With Crypto — an advocacy group started by Coinbase — has outlined seven UK crypto policy recommendations before the upcoming general election on July 4.

Stand With Crypto UK launched in London with an event at the House of Commons in May organized by its adviser, former Chancellor of the Exchequer George Osborne, just days before Conservative Prime Minister Rishi Sunak called the election earlier than most expected.

In a manifesto published on Thursday, the crypto advocacy group said the next government should promote the UK as a global web3 and tokenization hub and establish a joint industry-government task force to identify opportunities to position the UK as such.

Stand With Crypto UK recommended swiftly legislating for crypto assets, adhering to the principle of "same risk, same regulatory outcome" to protect consumers and foster industry growth. This includes regulating fiat-backed stablecoins to encourage competition in digital payments.

The group also prioritized recognizing staking as a regulated activity and ensuring retail participation, which it said is crucial for the functioning and innovation of proof-of-stake blockchains.

Stand With Crypto UK further suggested the government should undertake policy work to explore the advantages of decentralization across various sectors, including education, healthcare and telecommunications, encouraging all government departments to adopt blockchain technology for greater efficiency and innovation, led by the Department for Science, Innovation, and Technology.

It also recommended developing a strategy to integrate tokenization into the financial sector, including overturning restrictions on retail access to crypto exchange-traded notes and providing a sandbox environment for experimenting with real-world asset tokenization.

Finally, the group called on the election winners to revise UK legal frameworks to reflect technological advancements, ensuring clear digital property rights and establishing a crypto collateral regime based on the Law Commission’s recommendations.

“The next Government should promote the UK as a world leader in fintech, digital assets and tokenisation to generate investment, innovation and a more digital economy,” Stand With Crypto UK concluded. “This will drive productivity, growth and jobs across the UK economy, as well as improvements in the UK’s public services.”

No reference to crypto policy in UK political campaigns

The center-right Conservative Party and center-left Labour Party have traditionally dominated UK elections. This time around, the Labour Party is projected to win by a significant margin, and leader Keir Starmer, therefore, the likely next resident of 10 Downing Street.

Recent aggregated polling data from Statista has Labour on 38% of the vote, with the Conservatives trailing on 18%. However, the relatively new party Reform UK, now back under the leadership of Brexit-backer Nigel Farage, has eaten into the Conservatives figures, reaching 17% as of June 11. The Liberal Democrats and the Green Party command 15% and 8% of the election polling, respectively.

None of the major UK political parties mention crypto in their 2024 manifestos, nor did they return requests for comment from The Block regarding any crypto-specific policy ideas or plans for the industry in the country.

The only tangential reference was a comment made in the Conservative's manifesto that read, “We are proud to be the leading market for starting and growing a FinTech firm — part of our world-leading financial and professional services which supports the employment of almost 2.5 million people.”

In June 2023, Prime Minister Sunak said he was keen on providing regulatory clarity regarding how crypto businesses should register and operate in the U.K. "We must embrace new innovations like Web3, powered by blockchain technology, which will enable start-ups to flourish here and grow the economy," Sunak's office said at the time.

UK contrast with increasing crypto influence on US political campaigns

The crypto industry’s seeming lack of influence in UK political campaigns contrasts those in the U.S. ahead of the November presidential election.

After former President Donald Trump — the presumptive Republican presidential nominee — hosted an event on May 8 for people who bought his Trump “Mugshot” NFTs, went on record supporting crypto, began accepting it for campaign donations and labeled Democrats and the Biden administration as anti-crypto, the industry has gained growing influence in political campaigns in the U.S., with significant funds being mobilized by crypto-backed super political action committees.

Stand With Crypto also formed a new affiliated federal PAC to raise money from its 440,000 members in support of crypto-friendly politicians last month.

On the Democrat side, sources subsequently told The Block they noticed a significant “shift” in tone from the Biden administration and campaign toward crypto, with a new willingness to understand digital assets and their communities. The U.S. Securities and Exchange Commission approved 19b-4 forms for eight spot Ethereum ETFs from firms like BlackRock and Fidelity on May 23.

Trump later pledged to free Silk Road creator Ross Ulbricht, stop central bank digital currencies and support the right to crypto self-custody in a speech to the Libertarian Convention on May 25. This month, Trump also said he would advocate for bitcoin miners in the White House, saying that miners contribute to energy grid stability and calling it the “last line of defense” against a CBDC.

On Wednesday, sources told The Block that President Biden's re-election campaign is in discussions to accept cryptocurrency donations through Coinbase Commerce, the same merchant payments service used by Trump’s campaign to begin accepting donations last month.

UK crypto regulations

In 2021, the UK’s financial regulator, the Financial Conduct Authority, banned the sale of derivatives and exchange-traded products to retail investors. However, the UK's stance on cryptocurrency regulation has subsequently been evolving, with crypto ETNs launched on the London Stock Exchange in May — though they are still not available to retail traders, unlike the U.S. spot Bitcoin exchange-traded funds.

The UK’s Financial Services and Markets Act 2023 provided the groundwork for the nation’s regulators to oversee stablecoins and other crypto activities, placing crypto assets within the same regulatory framework as traditional financial services last year.

As part of FSMA, the UK introduced new regulations for supervising the country’s Digital Securities Sandbox in December — aiming to facilitate the adoption of digital assets across financial markets with oversight from The Bank of England and FCA.

The UK’s new crypto advertising rules, regulated by the FCA, were also introduced last year. However, the regulatory changes have caused some crypto firms, like Bybit, to suspend services in the UK. Others, like Coinbase, have started requiring risk-acknowledgment forms from UK users to comply with FCA rules.

In April this year, UK Economic Secretary to The Treasury Bim Afolami said the government would legislate by the end of July 2024 on a new regulatory framework for crypto assets, including the oversight of stablecoins, crypto staking, exchanges and custody services, building on the FSMA. However, those plans have subsequently been derailed by the election campaign. 

Additionally, the UK has been exploring a potential CBDC, though the Bank of England and Treasury Department remain undecided on its necessity.