The UK needs to show more interest in embracing cryptocurrency, with multiple barriers hindering its adoption. Despite some moves by the government and regulators, the country’s financial sector remains hesitant about integrating digital assets like blockchain bonds into its systems. High costs, complicated legacy systems, and a cautious investment culture drive this reluctance.
High costs of Blockchain bonds
One major obstacle to blockchain bonds in the UK is the high integration cost. Digital bonds require a large volume of issuance to be financially viable, but banks and institutions are reluctant to take the first step without streamlined systems. Incorporating blockchain into UK banks’ legacy infrastructure is considered expensive and time-consuming. The Australian stock exchange experienced this firsthand when a blockchain project failed two years ago, leading to a loss of $171 million. The UK financial sector seems wary of repeating such mistakes.
Regulatory challenges in the UK
The UK’s regulatory framework for crypto is fragmented and underdeveloped. While the Financial Conduct Authority (FCA) has implemented anti-money laundering measures and tightened advertising rules, these actions have provided little clarity. Only a limited range of crypto assets falls under the FCA’s regulation, leaving investors unsure about what is allowed. This contrasts sharply with the European Union’s comprehensive Markets in Crypto Assets Regulation (MiCA), which offers clearer guidelines on consumer protection, market stability, and other vital areas.
The UK’s reluctance to adopt a similar regulatory framework stems from concerns that MiCA opens the door too widely to an unproven technology. As a result, the country’s approach remains slow and disjointed, creating uncertainty for both businesses and investors in the sector.
Investor caution and tax changes
Investor interest in crypto assets in the UK has also waned in recent years. The notorious volatility of cryptocurrencies has caused retail investors to shy away from the market. Recent changes to the UK’s tax policy have added further disincentives. Starting in April, the tax-free allowance for capital gains on crypto has been reduced from £6,000 to £3,000, making crypto investments less attractive. With the risk of significant losses and the potential for a hefty tax bill, many UK investors choose to stay away from the crypto market.
Additionally, the media narrative around cryptocurrency has been dominated by stories of fraud, scams, and high-profile failures. This further cemented the perception that crypto is risky and unreliable. The UK’s conservative investment culture, which tends to avoid speculative ventures, reinforces this cautious approach to digital assets.
The combination of regulatory uncertainty, high costs, and risk-averse investors suggests that the UK’s financial sector will continue to take a cautious stance on crypto for the foreseeable future. Without significant changes in regulation or public perception, widespread adoption of blockchain technology and digital assets in the UK seems unlikely.