Sunak must welcome Bitcoin to the financial markets with its fundamentals intact

Wednesday 04 May 2022 06:00

Mainland Brits often joke about their fellow expats in Gibraltar, saying that watches should be set back 20 years when you’re there. Gibraltar has always been a popular target for condescension. Yet this supposedly “backward” place has always been ahead of the Bitcoin adoption and regulation curve. In 2018, the territory was the first jurisdiction to launch a legal and regulatory framework for Bitcoin. Last week, he unveiled a long list of measures to protect market integrity.

Gibraltar is fast becoming a global leader in crypto, and as such the Chancellor should be looking at it very closely, if he is serious about making the UK a global home for these currencies.

Gibraltar debunks many commonly quoted lies about Bitcoin. There is a fear around Whitehall – and in other corridors of power around the world – that crypto is still in its Wild West period, and that Bitcoin investors and startups will only be attracted to jurisdictions with the lowest levels. more anarchic and more liberal.

But Gibraltar’s latest move is not to ease existing financial regulations, but to toughen them. The proposals address some of the latest concerns about bitcoin’s acceptability to politicians, markets, and, of course, bitcoiners themselves.

More importantly, the new regulations aim to strengthen the integrity of the markets in which Bitcoin operates. In its new guidelines for crypto businesses, the Gibraltar Financial Services Commission warns traders that they must combat “the improper manipulation or influence of price, liquidity or market information, or any other conduct, which is contrary to the integrity of the market”.

To make the UK the destination of choice for Bitcoin entrepreneurs and investors, Rishi Sunak must understand that Bitcoin cannot be completely tamed: it is already too big, too strong, and too decentralized for one player to impose its regulatory whims. . Just look at what happens when countries like China try to suppress bitcoin: miners simply move to friendlier territories like El Salvador or Ukraine, taking innovators and investors with them.

But neither is the answer to follow Bitcoin’s exceptionalism and sweep away all the laws and regulations that govern the rest of the financial system. Bitcoin may exist entirely outside of the traditional fiat ecosystem, but it still operates as part of a larger financial market, with growing interactions between the old and new worlds of money.

As the saying goes, you can’t have milk without a cow: you can’t attract Bitcoin businesses without the right mix of rules-based incentives and certainties. Additionally, sensible regulation is essential to show the market that the Chancellor wants to introduce rules that will ultimately strengthen Bitcoin.

To make the UK a crypto hub, first and foremost we need smart legislation. For example, Sunak can show Britain is open for business by guaranteeing it will pursue light regulation, even if it puts him at odds with Threadneedle Street skeptics. It could follow in Portugal’s footsteps by opting for a zero percent capital gains tax structure.

Continuity is even more important. By creating a firm and inflexible policy framework that will guide future Chancellors, Sunak will create peace of mind for investors. This, however, can only be possible if the Treasury and regulators make a real effort to understand Bitcoin and craft rules – as Gibraltar does – that address the real issues in the space.

Ultimately, it’s not tax breaks or free ports that will get Bitcoin investors and entrepreneurs flocking to the UK: it’s the knowledge that the government understands the field. Sunak needs to engage the community and ask what challenges people face in this space. For a legal framework that will underpin a new era of prosperity and freedom for all, he need look no further than the Rock of Gibraltar.