The UK has an opportunity to benefit from Web3 companies leaving the US due to regulatory uncertainty. But to achieve this, the UK will need to follow its own regulatory path, easing requirements for cryptocurrencies in some respects, according to one think tank.
On October 2, the influential conservative think tank Policy Exchange published an article a report on Web3 with 10 proposals for the UK government, which it claims will help the country improve Web3 regulation.
One of the suggestions in the report is to limit the obligations of individuals holding tokens in a decentralized autonomous organization (DAO). The report cites as a negative example a recent ruling in the US that makes any US individual who owns or has owned tokens in a DAO liable for any violations of the law committed by the DAO.
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The report also notes that the UK’s main financial regulator, the Financial Conduct Authority (FCA), is relaxing its current “know your customer” (KYC) approach, allowing the use of “alternative and innovative technologies”, such as digital identities and blockchain analysis tools.
Experts say the UK should avoid undermining self-hosted wallets and regulate proof-of-stake services as a financial service. Other proposals include allowing private stablecoin issuers to place stablecoin reserves in the Bank of England, creating a “tax envelope” for cryptocurrency exchanges and creating a new sandbox under the Ministry of Science, Innovation and Technology.
Recently, UK regulators have taken a tougher approach towards the digital asset industry. The UK Treasury is considering banning all cold calls promoting cryptocurrency investments, and the financial watchdog has warned local cryptocurrency companies to follow its marketing rules or face consequences.