UK Moves to Regulate Crypto, ECB Counters Fears Over Digital Euro

As the United Kingdom is on a path to introduce new regulations for stablecoins and crypto staking, the European Central Bank is battling misconceptions about the digital euro.

Regulation in the cryptocurrency industry has been rather vague since cryptos started hitting the market. However, over the past few days, there have been some positive steps towards gaining some clarity when it comes to crypto and regulation. The United Kingdom is advancing its regulatory framework for cryptocurrencies, aiming to introduce new laws targeting stablecoins and crypto staking within the next six months.

Meanwhile, the European Central Bank (ECB) is addressing skepticism towards the digital euro. In Asia, Hong Kong's financial sector is increasingly embracing crypto trading, with traditional institutions and brokerages like Tiger Brokers and Victory Securities expanding their services to include cryptocurrencies, after getting regulatory approval.

UK Targets New Crypto Regulations Ahead of Election

The United Kingdom is on a path to introduce new regulations for stablecoins and crypto staking, with expectations to enact these laws within the next six months. This announcement was made by the Economic Secretary to the Treasury, Bim Afolami, during a crypto event hosted by Coinbase in London. Afolami made sure to highlight the government's commitment to finalizing the legislation before the upcoming general election, although he did not provide any detailed specifics about the pending regulations.

This move is part of the UK's broader ambition to become a "global crypto hub," a vision championed by Prime Minister Rishi Sunak in 2022. Sunak's pledge pointed out the importance of creating a conducive environment for crypto firms to invest, innovate, and grow in the country. Despite these aspirations, progress on crypto regulation has been rather slow, with the crypto community calling for clearer guidelines.

In an effort to address these concerns, the UK Law Commission made recommendations in July of 2022 for reforming domestic laws around the use and ownership of digital assets. These suggestions included the establishment of a new category of personal property specifically designed to protect the unique characteristics of digital assets. Additionally, the commission recommended a common law analysis of crypto assets and the creation of a specialized panel to advise on crypto-related legal matters.

By October of 2023, the UK government announced its intention to introduce more specific crypto regulations in 2024. This includes bringing the regulation of fiat-backed stablecoins under the oversight of the Financial Conduct Authority (FCA).

The timing of these regulatory efforts coincides with the anticipation of a general election in the latter half of the year. The Labour government, currently leading in early polls and generally perceived as less favorable towards crypto, is under pressure to advance these regulatory frameworks.

ECB Counters Digital Euro Skepticism

In other regulatory news from Europe, the European Central Bank (ECB) has been actively spreading information about the digital euro, aiming to demystify the project amidst widespread concerns and skepticism. ECB executives, including board member Piero Cipollone, have addressed these concerns head-on, particularly the banking sector's fears of disintermediation with the introduction of a euro central bank digital currency (CBDC). Despite the incorporation of features in the digital euro to mitigate risks—like limiting its use primarily for payments and not investments—banking associations and scholars continue to point out the potential for financial intermediaries to be bypassed, risking the traditional banking model.

The ECB has outlined several measures in the digital euro's design to prevent a mass exodus of funds from commercial banks to digital wallets. These measures are intended to make the digital euro more attractive for payments rather than as an investment vehicle, suggesting that banks could retain customer deposits by offering competitive interest rates.

Furthermore, ECB officials argue that the introduction of the digital euro is unlikely to precipitate a banking crisis, counteracting claims that banks could lose their primary refinancing source. They suggest that focusing only on the potential negatives of CBDCs overlooks the broader spectrum of challenges banks face, especially from stablecoins, e-money institutions, and big tech-sponsored financial services, which pose a much bigger threat to traditional banking roles.

ECB President Christine Lagarde has also spoken out against conspiracy theories surrounding the digital euro, assuring that the project does not aim to infringe on personal freedoms or privacy. The ECB is moving forward with the digital euro project, entering its preparation phase as of October.

Hong Kong's Financial Sector Embraces Crypto Trading

Meanwhile, in Hong Kong's financial sector, traditional financial institutions and brokerages have been moving to incorporate crypto trading into their services, after the local regulator's green light for crypto exchanges.

One notable instance is Chinese stock brokerage Tiger Brokers, which has successfully expanded its Type 1 license with the Hong Kong Securities & Futures Commission (SFC) to include crypto trading specifically for professional investors and financial institutions. The firm oversees 865,500 funded accounts with a total of $18.9 billion in managed assets. Tiger Brokers (HK) now offers trading in virtual assets like Bitcoin and Ethereum through a SFC-licensed platform and plans to extend these services to retail clients pending further approval.

Tiger Brokers is also exploring the addition of altcoins and an international expansion into markets where it holds licenses, like Australia, the U.S., Singapore, Hong Kong, the U.K., and New Zealand.

Similarly, Victory Securities, another Hong Kong brokerage, got a license from the SFC to provide crypto trading services to retail investors. The firm reported a big increase in virtual asset transactions and new customer sign-ups, which certainly suggests a strong market demand for compliant and secure crypto trading platforms. To attract new users, Victory Securities plans to introduce trading discounts.

Additionally, the licensed Hong Kong crypto exchange OSL has formed a partnership with Interactive Brokers, which allows the latter to offer BTC and ETH trading to retail investors. Meanwhile, crypto exchange Bybit is also trying to enter the Hong Kong retail trading market. However, obtaining a trading license in Hong Kong requires a large investment in corporate infrastructure and compliance, with costs potentially reaching up to $25 million.