The United Kingdom’s general election has ended in a landslide victory for the Labour Party, ending 14 years of Conservative Party government.
With that comes renewed optimism for positive action and engagement with the cryptocurrency industry.
Outgoing Prime Minister Rishi Sunak made much of his “crypto asset hub” ambitions, but industry observers said action to back his promises was sorely lacking.
With Labour now in power, the hope for positive action is cautiously renewed. Industry body CryptoUK told Cointelegraph:
“We have established strong relationships with Labour MPs and policymakers, and we intend to strengthen these ties going forward to advance the UK’s digital assets industry.”
Nick Cowan, group CEO of fintech firm Valereum, found room for optimism despite scant reference to crypto during the election campaign.
Cowan told Cointelegraph: “Having previously recognized the benefits of tokenized securities, fintech and even a central bank digital currency, if Labour is willing to lean into the digital assets space and harness innovation, huge opportunities to democratize finance will emerge.”
CryptoUK also highlights the opportunity for growth.
“We recognize that jobs, growth and inclusivity are key priorities for Keir Starmer’s administration. We firmly believe that our sector can significantly contribute to these goals,” said CryptoUK.
Cowan went on to add, “It’s a perfect opportunity for this government to seize upon and build the foundation for a supportive environment that lets the innovators innovate. There is always room for hope and change!”
What has Labour said about crypto?
Unlike the United States, where cryptocurrency has already made headlines in the 2024 presidential race, the UK election was surprisingly quiet on the issue.
For example, the Labour Party’s manifesto did not mention cryptocurrency even once. In January, however, Labour released its “plan for financial services,” which did mention the industry.
In that document, Labour said tokenization — the digital representation of financial assets using distributed ledger technology — “presents a significant new opportunity for the UK.”
Recent: Memecoins and AI are pushing Gamefi out of the spotlight
Labour said tokenization “could increase liquidity, provide access to new asset classes and fractionalized assets, and strengthen risk management (by reducing counterparty risks and other operational risks).”
For that reason, “A future Labour government will therefore look to make the UK a global leader in tokenization by advancing work to clarify the law around tokenization, and working with regulators to establish a proportionate, outcomes-based regulatory regime to oversee the technology.”
Labour said it would introduce regulatory sandboxes and pilot tokenized gilts — a UK government liability listed on the London Stock Exchange. Lastly, Labour said it would seek to develop partnerships with other financial centers to introduce interoperable standards.
The power of change
“Change” was the big election theme of Labour’s campaign, and change is what crypto advocates are hoping for.
Oliver Linch, financial regulatory lawyer and CEO of crypto exchange Bittrex Global, explains how Labour engaged in a significant charm offensive with the financial sector prior to the election.
“Historically perceived as less robust on economic issues than their Conservative counterparts, senior Labour figures have been actively engaging with City [of London] grandees and key influencers to reassure them of their pro-growth, pro-capitalism and pro-innovation stance,” said Linch.
While the Conservatives are often viewed as more “robust” on economic issues, as Linch puts it, that reputation has suffered over the past decade and a half.
If austerity spending programs and post-COVID inflationary pressures weren’t bad enough for the Conservatives, the party failed to leverage any noticeable benefits from Brexit. Perhaps the nadir of Tory (Conservative) rule came in 2022, during the 49-day premiership of Liz Truss, whose unfunded tax cuts crashed the value of the pound.
Truss was among the 251 Conservative politicians to lose their seats. Incoming Labour parliamentarians must now meet the expectations of the British public, who will demand they do better.
According to Linch, Labour’s electoral success presents a significant opportunity.
“Now, with the election behind them and a significant majority in hand, Labour can afford to be more audacious, seizing the myriad opportunities that digital assets present,” said Linch. “As a center-left party, Labour has compelling reasons to champion comprehensive action on crypto — a task the Conservatives, despite their professed enthusiasm, have largely left unfulfilled.”
The European outlook
Linch said another opportunity lies in differentiating the UK from European legislators who are currently struggling to make progress with the EU’s Markets in Crypto-Assets Regulation (MiCA).
“Discontent with the MiCA regulation is at a peak, as participants struggle with unresolved legal and operational issues,” said Linch. “Given that Labour has committed to not re-joining the EU, capitalizing on the current dissatisfaction with MiCA could be a strategic move to foster growth and fulfill numerous manifesto pledges.”
Joey Garcia, director and head of public affairs, policy and regulation at Xapo Bank, also sees potential in this area.
“MiCA has been generally seen as an overly cautious and protective approach, which is significantly weighted to incumbent and developed financial services businesses. Positive intervention from the Labour government would involve avoiding the pitfalls of excessive regulation while also ensuring that there are controlled, clear and safe boundaries for a secure ecosystem to develop in the UK,” Garcia told Cointelegraph.
Recent: NFTs and blockchain bridge Ethiopia’s past and present in new art exhibition
“Overall, the Labour government’s approach could be characterized as cautiously positive,” he added.
A very narrow window
While Linch and Garcia both see an opportunity for the UK, Linch points out that this window is only open for so long.
“With its supermajority, the Labour Party now has the opportunity to realize the socially progressive opportunities that crypto presents, to boost the UK economy in its push for growth, and to protect consumers and the public at large,” said Linch. “Doing so requires rapid action in order to beat the MiCA implementation date of December, but all the pieces of the puzzle are already in place. The incoming City minister [economic secretary to the Treasury] should put Web3 at the very top of the list of priorities for the new Treasury team.”