With MiCA Past the Finish Line, UK's Crypto Industry Calls for Rules of Its Own

The European Union finalized its wide-ranging markets in crypto assets (MiCA) legislation on Thursday, making it one of the first major jurisdictions to clarify its approach on supervising the sector. With the EU’s 27 nations now set to comply with the new regulation, other jurisdictions such as the U.K. – whose split from the bloc went down in history as the infamous “Brexit” – may feel some pressure to speed up implementing their own crypto rules, according to industry groups.

“While not flawless, MiCA is an extremely relevant regulatory stack that puts significant pressure on the U.K. and U.S. in terms of delivering operational clarity for crypto,” London-based lobby group CryptoUK said in a tweet on Thursday.

The EU’s bespoke MiCA package – which sets out authorization requirements for crypto service providers and token issuers to be enforced by member states – differs from the U.K.’s staged approach, with different regulators setting out their own requirements.

The U.K.’s post-Brexit economic strategy is laid out in the Financial Services and Markets Bill going through Parliament, and it contains provisions to regulate crypto as financial instruments and stablecoins as payments. A consultation on potential regulations for the sector, published in February, proposes broad consumer protection rules.

On Monday, with the MiCA vote imminent, U.K. Treasury Economic Secretary Andrew Griffith told CNBC that the government hopes to set out specific legislation for crypto in the next 12 months.

However, the U.K. is already behind the EU in setting rules for the crypto sector. Industry lobby groups say this could weigh heavily on U.K. policy makers.

“With the adoption of MiCA, the EU has solidified its position as a regulatory leader for years to come,” CryptoUK said.

Meanwhile, the U.K. has looked to MiCA for inspiration.

“There are aspects of [MiCA] which are interesting and I think everybody likes so we have factored that in our paper,” Gwyneth Nurse, director general of financial services at the Treasury, said at Innovate Finance’s annual Global Summit in April, referring to the U.K. consultation on crypto rules.

The U.K.’s consultation said policymakers were considering an authorization regime similar to that of MiCA. While the EU also made significant room for rulemaking around asset-backed stablecoins, the U.K. is attempting to regulate them as payments. Diverging from MiCA, the U.K.’s crypto proposals leave out areas such as settlement and financial advice.

The EU’s advantage over the U.K. when it comes to crypto regulations may just boil down to the fact that the former has managed to finalize its approach and offer clarity. The U.K.’s approach comes with a period of “uncertainty,” because rules have yet to come out, said Rhiannon Butterfield, policy adviser on payments and innovation at London-based lobby group U.K. Finance, in an emailed statement.

However, many crypto firms she has spoken with value the U.K’s staged approach because it builds on existing financial regulation, Butterfield said.

The U.K.’s strategy enables it to adapt more easily to crypto as things change, Nurse said at the Innovate Finance conference.

While the EU may still need to draft a followup legislative package dubbed “MiCA 2.0,” the U.K. will just bring out the relevant regulation at the right time, Riccardo Tordera Ricchi, head of policy and government relations at the London-based Payments Association, said.

It’s unlikely the U.K. will try to speed up its efforts to regulate the crypto sector now, Ricchi said.