A Bitcoin election? Don’t count on it

May 24, 2024
Oliver Linch

TAKING most of Westminster by surprise, Prime Minister Rishi Sunak announced the UK will head to the polls in a General Election on July 4. The “Independence Day” headlines write themselves – but spare a thought for the UK’s digital assets sector, for which this could be a key election.

The current government has talked a good game on digital assets. Sunak has built a reputation as a crypto enthusiast over the past few years, declaring when he was Chancellor of the Exchequer that he would turn the UK into “an international hub for crypto”.

That was in early 2022. If two years is a long time in politics, it is an epoch in crypto-time; and patience in the sector is wearing thin. A succession of City Ministers have made promising speeches, and an expansive Treasury consultation paper in February 2023 gave many hope that the UK would step up and realise its ambitions.

That hope has now largely been scuppered. The introduction of stringent financial promotion rules in October 2023 was seen by many as a misstep. Even the pared-back new rules on stablecoins and staking are now unlikely to materialise, the deadline of “early 2024” having already been missed.

The big draw for pro-Brexit Conservatives is the opportunity to take the EU’s lunch. As companies prepare to implement MiCA, they are increasingly discovering traps, problems and difficulties. The UK has the opportunity to provide a real alternative, a useful crutch for MPs who have struggled to maintain enthusiasm from even the most vocal Eurosceptic voters.

If the Conservatives make digital assets a feature of their election campaign, their pitch will be based on aspiration rather than proven successes. Right-of-centre parties internationally, from Canada’s Conservative Party to South Korea’s People Power Party, have found electoral upside in promoting themselves as crypto advocates.

Officially, there is no official Labour Party position on digital assets. Their January 2024 Financial Services policy document made only passing references to securities tokenisation, and a few paragraphs on CBDCs. The latter is likely to alienate rather than galvanise digital asset enthusiasts, but the former is of real interest, with Citi Group estimating that tokenised financial assets could be worth nearly $4 trillion globally by 2030.

The Labour Party is widely expected to win the upcoming election, and its strategy with respect to the financial services industry more broadly seems to be one of “don’t rock the boat”. Senior Labour MPs have been doing the rounds amongst City grandees, seeking to reassure them that Starmer’s Labour Party is not anti-growth, anti-Capitalism, or anti-innovation.

However, there are good reasons why Labour may consider taking a stronger line on digital assets in the coming weeks. Firstly, FinTech generally, and crypto in particular, is popular amongst young voters. Getting 18–24-year-olds out to vote is always challenging, but there is a good reason that crypto has become a key feature of election campaigns in the US, Korea and the EU.

Secondly, there is a strong left-wing ideological case to be made for both fostering the UK’s reputation as a digital assets hub, and regulating the sector carefully. A lack of access to traditional banking services is a problem that is becoming increasingly prominent in the UK. It disproportionately affects minority groups, and causes real harm to some of the most vulnerable in society: victims of domestic abuse, refugees, and others who find themselves unable to secure financial services from traditional institutions.

Creating a well-regulated, legitimate path for Web3 companies to provide services in the UK could go along way towards alleviate those problems, while a proper regulatory framework is essential for preventing abuses, scams and fraud. If government doesn’t create a path for good actors to behave well, it simply clears the way for bad actors to behave nefariously.

There are some aspects of our current trajectory that will likely survive whoever wins. Regulation of stablecoins is well under-way, and there are very few that would object to seeing a new Labour government adopt those rules in short order. Similarly, the creation of a framework for tokenisation is a no-brainer.

Many will hope that Labour’s references to CBDCs are little more than pre-election chatter. As I have argued previously, these are at best pointless nonsense, and at worst deeply concerning. Disliked by both the TradFi and crypto sectors, Labour would do well to quietly drop the topic.

If you’re really looking for a Bitcoin Election, you’d be better off looking to the US, where the issue is becoming increasingly prominent, and – on both sides – increasingly pro-crypto, in advance of the Presidential election later this year.

But, crypto watchers on this side of the Atlantic should still keep their eyes peeled. Many will hope that Labour will be more engaged in this space once in office, especially as there remains considerable interest in the UK’s potential as a digital assets hub.