UK Govt Crypto Plans: We Need an Insurance Roadmap

As the UK government announces plans to move into crypto, maybe it’s also time for major insurers to offer PAYG cover on crypto and digital assets?

It’s a fast growing trend, and regardless of the risks, many people are tempted by the lure of quick profits on crypto coins and NFTs. That alone should prompt the insurance brands, FCA and others to get around a table and figure out a roadmap to manage secure, insured trading platforms and exchanges.

But looking beyond quick buck investors, one day the the spending of cryptocurrencies online with retailers will reach a mass-market tipping point and that will also prompt the need for insurance cover on digital assets being sold by big brands via Amazon, eBay, mainstream banks, supermarkets or individuals using social media channels. Like old fashioned cash, religion or love, crypto only exists in terms of value if people believe in it – that means a guarantee of some sort standing behind the hype.

Here’s the word from the UK Govt;

The government has today announced moves that will see stablecoins recognised as a valid form of payment as part of wider plans to make Britain a global hub for cryptoasset technology and investment.

• Stablecoins to be brought within regulation paving their way for use in the UK as a recognised form of payment.
• Announcement part of a series of measures to make the UK a global hub for cryptoasset technology and investment.
• Measures include legislating for a ‘financial market infrastructure sandbox’ to help firms innovate, an FCA-led ‘CryptoSprint’, working with the Royal Mint on an NFT, and an engagement group to work more closely with industry.

This is part of a package of measures to ensure the UK financial services sector remains at the cutting edge of technology, attracting investment and jobs and widening consumer choice. It includes:

• introducing a ‘financial market infrastructure sandbox’ to enable firms to experiment and innovate,
• establishing a Cryptoasset Engagement Group to work more closely with the industry,
• exploring ways of enhancing the competitiveness of the UK tax system to encourage further development of the cryptoasset market,
• and working with the Royal Mint on a Non-Fungible Token (NFT) this summer as an emblem of the forward-looking approach the UK is determined to take

Chancellor of the Exchequer, Rishi Sunak said:

It’s my ambition to make the UK a global hub for cryptoasset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country.

We want to see the businesses of tomorrow – and the jobs they create – here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term.

This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation.

Stablecoins are a form of cryptoasset that are typically pegged to a fiat currency such as the dollar and are intended to maintain a stable value. With appropriate regulation, they could provide a more efficient means of payment and widen consumer choice. The government intends to legislate to bring stablecoins – where used as a means of payment – within the payments regulatory perimeter, creating conditions for stablecoins issuers and service providers to operate and invest in the UK.

By recognising the potential of this technology and regulating it now, the government can ensure financial stability and high regulatory standards so that these new technologies can ultimately be used both reliably and safely. The UK’s vision for being a global hub for cryptoasset technology was set out in a speech by the Economic Secretary to the Treasury, John Glen at the Innovate Finance Global Summit yesterday.

He also announced that the UK will proactively explore the potentially transformative benefits of Distributed Ledger Technology (DLT) in UK financial markets, which enables data to be synchronized and shared in a decentralised way to potentially achieve greater efficiency, transparency and resilience.

The government will legislate to establish a financial market infrastructure (FMI) ’Sandbox’ that will enable firms to experiment and innovate in providing the infrastructure services that underpin markets, in particular by enabling Distributed Ledger Technology to be tested. The government further confirmed that it will initiate a research programme to explore the feasibility and potential benefits of using DLT for sovereign debt instruments.

The Govt is expected to try and get its head around NFTs later in the year, with a policy statement expected in the autumn.