What Does the Future Hold for Crypto-Asset Payments?

Joaquin Ayuso de Paul, Head of Nium Crypto, delves into the future of crypto-asset payments in the UK.

Around the world, cryptocurrencies are coming under regulatory pressure, but some exciting developments have come out of the UK in the past few weeks.

The British Treasury announced that it intends to bring stablecoins under the Financial Conduct Authority’s (the UK regulator) remit if used for payments as part of a broader plan to make the UK a hub for digital payment companies.

In January of last year, the British Treasury consulted on whether and how it should regulate crypto assets. Given that stablecoins have a stable value linked to traditional currencies or assets like gold, the Treasury’s view that they have the potential to develop into more mainstream usage; therefore, regulating stablecoins would ensure they are used safely by the public.

The FCA has come under widespread criticism in recent months for stifling the innovation of FinTech – an industry in which the UK supposedly wants to be a leader. But as crypto is quickly becoming more widely adopted, delays in implementing regulation is causing the UK to fall behind on this ambition. For example, in the US, stablecoins are already being used to facilitate trading, lending, or borrowing other digital assets. As a result, they are moving to craft regulations to support faster, more efficient, and more inclusive payment options.

The move to regulate the industry comes at a crucial time for the UK economy. Rishi Sunak, Chancellor of the Exchequer, said in his statement:

“We want to see the [cryptocurrency] businesses of tomorrow – and the jobs they create – here in the UK, and by regulating effectively, we can give them the confidence they need to think and invest long-term.”

What is the proposed regulation?

While no official regulation has been published yet, the British Treasury published a response to consolidation and called for evidence, which considers the following:

  • An amended e-money framework that can deliver a consistent framework to regulate stablecoin issuance and the provision of wallets and custody services.
  • An amendment to Part 5 of the Banking Act 2009 to include stablecoin activities to apply in cases where the “the risks posed have the potential to be systemic, and so the threshold for the Bank of England supervision is met”.
  • An amendment to the Financial Services (Banking Reform) Act will mean stablecoin-based payment systems will be subject to appropriate competition regulation by the Payment Systems Regulator.

What does this mean for crypto in the UK?

Establishing a regulatory environment for stablecoins used as payment allows market entry to support innovation while ensuring regulatory standards apply for the customer’s benefit, market integrity, and stability. Ultimately, the regulation intends to safeguard and protect the customer, and organisational and reporting requirements will herald the need for self-regulation.

For the UK’s FinTech sector, this is a welcome move and will give the UK a fighting chance to uphold its approach to financial services and future technology innovation by ensuring effective competition continues. It also marks a more serious consideration of the crypto industry, with more announcements coming in the forthcoming months.

That said, the proposed regulation comes with a disadvantage to financial promotions. Firms designated as regulated stablecoin service providers will not be able to act as Section 21 approvers of financial promotions. These businesses will not be able to promote investment opportunities to potential investors who aren’t certified as high net worth individuals or sophisticated investors.

What does the future hold?

This announcement is a pivotal and exciting moment for the future of crypto-asset payments in the UK, and regulation is a crucial enabling factor for the industry.

The UK will be able to attract and retain top FinTech innovation and support its plan of becoming a global hub for digital payments by attracting talent from across the globe. The government will be paid dividends in driving investment in UK FinTech and adding to the value of the exchequer.

 

About Joaquin Ayuso de Paúl

Joaquín Ayuso de Paúl serves as Head of Nium Crypto. Joaquin’s work focuses on expanding the business into the crypto, investment and lending sectors. He is a firm believer in leveraging the core of Nium’s current offerings to provide new avenues for users. His passions also drive him to explore the NFT, web3 and blockchain spaces. 

Prior to Nium, Joaquin co-founded and served as CTO of Tuenti, a private social network often referred to as the “Spanish Facebook”. He also founded Kuapay, which developed a secure, mobile, payment method platform in Chile and Colombia. He also recently co-founded Rayo, a digital bank for immigrants in the US, which launched in 2021.

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