The collapse of crypto underlines tensions in British politics

It was an impressive timing. Just five weeks after Finance Minister John Glen and unexpectedly claimed that Great Britain was "the very best place in the world to found and scale crypto companies", the cryptoma markets experienced an unordered breakdown, the questions raised the whole effort.

Firstly, an enormous decline in cryptocurrencies has destroyed a circulation value of around $ 1.8 trillion since the highlight last November and reinforced the point that most of these tokens for anything but speculation are too volatile.

Then the implosion of the supposedly stable coin Terrausa, a token that used an algorithm to maintain its dollar value, and the depegging of Tether, the largest and allegedly fully secure stable coin, have doubts about what the responsible face of crypto should initially be laws.

But the speech by Glen - accompanied by the effect -hazard announcement of a non -fungable token of the Royal Mint - promised that there was much more to do to make the United Kingdom a "global center" that is "for innovation".

This was a clear political sign that crypto can no longer be excluded from the system, but must be regulated. The problem is that nobody is sure what that should mean, especially not now.

It is not entirely clear why the United Kingdom has decided to give everything in the real world with such questionable value and limited use. But enough about Brexit. Since leaving the EU, the financial policy debate has been shaped by a political wish to be internationally leading. And the crypto conversion may owe something that the children no longer call Fomo.

After all, the EU had already started define regulation for crypto-assets in 2020, which was controversial. After the crypto exchange Binance was blocked in Great Britain, it found a warm welcome in France.

one-upmanship is a bad basis for the regulations-even less if there is real uncertainty about what good politics looks like or even, what sense it has to regulate here. Is the main motivation of consumer protection, system stability or the establishment of Great Britain as a breeding ground for crypto business - and how should we deal with the inevitable compromises between these concerns?

First of all, the regulatory authority believes that it has already gone the border between the promotion of innovations and the determination of some basic rules. The Financial Conduct Authority (and Glen) points to the regulatory sandbox, which has been imitated worldwide, which has supported more than 50 blockchain start-ups. It has registered groups as part of an anti-money laundering regime. It is likely that it will receive powers about how crypto products are advertised.

The industry is of the opinion that the FCA has already been so persistent that progress is suffocated. "Full nightmare" was the judgment of a consultant on the registration procedure, which only approved about a third of the applicants. Regulated crypto can also be an oxymoron for some true believers: Terra, for example, thrown because it was a decentralized stable coin and not one that was bound to Fiat assets.

So far, the British government has not clearly decided on one side. Since even the crypto-gold boy Sam Bankman-Fried says that Bitcoin has no future as a payment network and that most tokens there have no obvious value out there, the question arises as to how much crypto really has to be "regulated" in order to make the best of the blockchain in the financial system.

The regulatory authorities combined their first idea -oriented "cryptosprint" with dark warnings last week that buyers of assets should "be willing to lose all of the money invested". With a view to future scandals, they want a clear political direction (i.e. cover), where the borders are to be drawn, including the question of whether a crypto assets should ever be covered by the Financial Services Compensation Scheme.

The market crash will increase the demands for regulation and possibly accelerate measures. But it also illustrates the tensions in the de facto regulatory blessing of products, of which the authorities really believe that they should only be used by wealthier or professional investors, but which are still bought by many consumers.

helen.thomas@ft.com
@Helentbiz