However, just like with all other countries, crypto regulations in the UK have been a major challenge that is yet to be solved, and this remains the major inhibitor to mainstream cryptocurrency adoption in the country.
UK as Europe’s Leading Crypto Hub
The UK has also emerged as the leading cryptocurrency hub in Europe. A recent report by Chainalysis showed that the country accounted for around $170 billion worth of cryptocurrency transactions. This is a major growth for the country, considering its financial framework was deeply affected during Brexit.
The Chainalysis report further noted that central, northern, and western Europe (CNWE) was the largest cryptocurrency economy worldwide. This region has received over $1 trillion worth of cryptocurrencies over the past year.
The report stated that the UK beat other countries such as France, Germany, Switzerland, and the Netherlands to emerge as the number one country in the region in cryptocurrency adoption.
The UK crypto investors also showed signs of diversifying into other cryptocurrencies. Bitcoin, the largest cryptocurrency globally by market capitalization, emerged as one of the most traded cryptos in the UK, accounting for 27% of the country’s transaction volume.
Other coins that are also seeing major adoption in the country include Ethereum and wrapped Ethereum, which make up 40% of the UK’s total transaction volumes. However, despite the gains that the UK has made in terms of crypto adoption, the country is still far behind North America, currently holding the top position as a major crypto hub globally.
Like many countries, the UK’s financial market regulator, Financial Conduct Authority (FCA), has ensured that crypto firms operating in the country have the required licenses and registrations. The regulator has also issued warnings against firms or individuals found to be offering services for which they are not regulated.
Following the Brexit deal, firms originally operating in the UK using licenses secured in the European block have been forced to seek new registrations with the FCA. The FCA has given these firms dates by which they need to seek the new registrations.
The growth in crypto adoption in the UK also comes when the global financial environment is shifting towards cryptocurrencies. Institutional investors are leading in investing in cryptocurrencies as an asset class to diversify their portfolios. Retail investors are following this trend and are also looking into tapping into this rapidly growing sector.
Bank of England and CBDCs
The boom of cryptocurrencies this year has led governments and their central banks to look into ways to create a digital currency that is better regulated and one that can facilitate cross-border payments.
A central bank digital currency has been a hot topic worldwide, and some countries have made major strides in affecting the development of these digital currencies. Among the countries that are in the final phases of CBDC development is China. The country is currently in the public testing phase of the e-yuan that has already been rolled out to a select part of the population.
The UK and the US are among the advanced economies that have done very little to effect the launch of CBDCs. However, recently, the Bank of England formed a task force to research CBDCs, their benefits, and design.
The Bank of England has formed the Digital Pound Foundation that will spearhead the research into a CBDC. Ripple is among the stakeholders chosen for this research, showing that the country could be considering launching a digital pound that will also be used to facilitate cross-border payments. Ripple is one of the leading blockchains offering remittance and payment services.
While all the signs point towards the crypto market in the UK growing over the coming years, there is still the possibility that strict regulations could come that could inhibit this growth. However, many market analysts have argued that crypto regulations have a long-term benefit to the crypto market.