UK lawmaker rules out crypto tax breaks amid fears of race to the bottom: ‘We want to attract good actors’

• The next general elections in the UK could get in the way of the current government’s efforts to draft and approve a bill to regulate its crypto sector.
• Lisa Cameron, chair of the UK Parliament’s cross-party group on crypto, wants to see the UK’s next generation at the helm of fintech.

Lisa Cameron was a crypto sceptic 18 months ago.

Now Cameron, chair of the UK parliament’s cross-party group for crypto, is pushing against the clock to help shape what could be game-changing rules for Britain’s digital assets sector.

The UK government led by Prime Minister Rishi Sunak is preparing to introduce sweeping legislation on crypto. Cameron hopes for a bill to be drafted, approved and passed before the next general elections in autumn 2024.

That’s important because if a new government led by the Labour Party leader Keir Starmer wins it may opt to rewrite the legislation. Cameron, like many lawmakers in London, are eager to establish a British crypto regime and catch up with the European Union, which is already starting to implement its own new legislation over the coming years.

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In her position, Cameron has an influential perch in the legislative drama to come. But the fact she’s there at all is a surprise. A doctor in clinical psychology from a town southeast of Glasgow, she became a member of Scotland’s leading, independence-driven Scottish National Party. Now, she is a leading voice in the parliament on blockchain technology, and the cross-party group’s work helps direct policy.

It was the end of 2020 when Cameron first got involved with cryptocurrencies. A constituent told her about losing thousands of pounds in a crypto rug-pull scam. Cameron promised to find the lawmaker responsible for policy around digital assets and was surprised to find a vacancy.

Cameron decided to fill the role and embarked on a “whirlwind journey”. On the way, she came to appreciate the potential of crypto and its underlying technology, while heeding risks to consumers.

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‘If we were to go down a route that looked at gambling regulations, then the UK could become somewhat of an outlier in that sense’

—  Lisa Cameron

Her hope is that stoking a crypto hub in Britain will fuel much needed growth for an economy struggling to overcome the challenges of Brexit. For Cameron, the UK is well positioned to secure this role given its longtime support for fintech startups.

“People expect the UK to have clarity of purpose, for there to be a robust system that one can have confidence in,” Cameron told DL News in an interview.

Now the clock is ticking with the election looming. “If we move past the election period, then we’re into a new government wanting to put their own stamp on it again,” Cameron said, likely delaying the roll-out of new rules. This may leave the UK in a “less competitive position, given that MiCA and the European Union will have moved forward considerably by that time.”

UK as a crypto hub

Sunak, in his previous role as finance minister, promised to turn the UK into a crypto hub. He also pushed to launch an NFT through the Royal Mint, a plan the government dropped in March.

Yet the UK is now sandwiched between two opposing approaches when it comes to regulating crypto. US regulators are roiling the crypto asset industry after taking a series of legal actions against top Bitcoin platforms, including Binance and Kraken. A coherent regime in the world’s top economy seems very far away.

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On the other side, the EU has blazed a clear legal path for crypto with a new set of rules under the Markets in Crypto-Assets law, which will roll out over the next year and a half.

In her talks with crypto companies, Cameron noticed that businesses are looking to “branch out” of the US until the environment becomes more favourable.

“It’s been interesting to hear their accounts of what’s happening in the US,” she said. “And also to think about the opportunities that that provides for the UK moving forward as well at the current time.”

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Catching up with the EU’s regulatory clarity could give the UK the chance to attract any businesses that stray away from the more hostile, regulation-by-enforcement, American approach.

Research shows investment closely follows regulation, according to Cameron. “That gives us good impetus in the UK to move forward at pace over the next 12 months to try to create our own bespoke regulatory framework.”

In February, the UK Treasury laid out a plan for regulating crypto activities like trading and investing. The move, kicking off a legislative process, was generally welcomed by the industry. Yet some worry that lumping together centralised and decentralised finance could hamper innovation.

Following a turbulent year for crypto, topped by the dramatic downfall of the giant exchange platform FTX, Cameron sees the real-life risks for consumers.

“That has made me double down and feel that it’s much more important we have regulation in place for protection of consumers and investors and to place the UK in a good position moving forward for this digital age,” she said.

Is crypto gambling?

The authorities are sending the crypto sector mixed signals. Last month, for instance, the parliament’s Treasury Committee recently dubbed crypto trading as equivalent to gambling, noting that unbacked virtual currencies have “no intrinsic value and serve no useful social purpose.”

While the committee challenges the government’s proposed plan for bespoke regulation which Cameron supports, the government has said that it will stick to its set path forward.

“If we were to go down a route that looked at gambling regulations, then the UK could become somewhat of an outlier in that sense, as opposed to MiCA and some of the other approaches that are being taken across the international community and other jurisdictions,” she said.

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British banks are another obstacle to cryptocurrency growth in the UK. Two of the largest banks, Nationwide and HSBC, are among those that set a £5,000 daily cap on clients’ spendings on crypto assets.

“In order for the UK to be open to business from the sector, it’s a basic requirement that people have to be able to set up a bank account,” Cameron said.

The FCA’s flaky licensing reputation

The UK’s financial watchdog has garnered a flaky reputation for its uneven granting licences to firms offering crypto services. As of January, the Financial Conduct Authority had only approved 15% of applications over a two-year period.

Companies have grumbled about insufficient feedback on where they went wrong in the process to gain regulatory approval. Cameron has raised the issue with the government and the finance minister.

“I know that the FCA have come back to say that they are developing their expertise in terms of their staffing complement in the field, and that they have been trying to make sure that there’s more engagement with industry, and also a more streamlined, faster process,” she said.

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For Cameron, the UK offers top-of-the-line research and development capacity contributing to the “digital revolution.”

“I don’t think we’re ever looking at a race to the bottom where we attract bad actors,” she said, while crossing out the need for incentives like tax cuts. “We want to attract good actors who wish to comply with regulations that will be put in place.”

The past year and a half have opened the Scottish MP’s eyes to how blockchain technology and cryptocurrencies can improve financial inclusion, bring the unbanked into the financial system, and support cross-border remittance transfers, which are vital for improving the quality of life in developing economies.

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Then there is connecting with Millennials and Generation Z, who may be more receptive to using crypto.

“We’re at a stage where the next generation is a digital generation,” the lawmaker said.

The fuel that keeps Cameron going in her growing role is the notion of “being able to transform our ways of life through digital innovation. And I want to see young people across the UK being at the helm of that.”