LONDON, UK – British Prime Minister Rishi Sunak faces pushback from bankers and policymakers over his UK crypto hub dreams. As PM, Sunak is facing resistance from policymakers and UK banking giants impeding his plans, and it remains to be seen how the crypto landscape will be shaped in Britain. 

Sunak’s UK crypto hub plan

The crypto-friendly Sunak has maintained a positive approach to cryptocurrencies since 2020 when he served as Chancellor of the Exchequer. On April 4, the government outlined a plan to make the UK a “global cryptoasset technology hub.” The government’s plan will seek the following measures.

1. Stablecoins are to be regulated as a form of payment.

2. Legislation drafted for a financial market infrastructure sandbox.

3. Creating the Cryptoasset Engagement Group to advise the government on the crypto sector, led by a chair appointed by the Economic Secretary.

4. Exploring ways to increase the competitiveness and efficiency of the UK tax system regarding cryptocurrencies.

5. Reviewing how DeFi loans are treated for tax purposes.

6. The Chancellor of the Exchequer will commission the Royal Mint to create an NFT during the summer of 2023.

7. Financial Conduct Authority (FCA) to hold a two-day “CryptoSprint” to gain insight from crypto industry participants.

Banking blockade

Banking giants in Britain have stonewalled the plans by limiting transactional engagement with crypto. Last month, two of Britain’s largest banks, HSBC and NatWest, set restrictions on crypto withdrawals citing the volatile risks associated with the digital currencies market. 

NatWest has limited daily withdrawals of crypto to £1,000 and a 30-day limit of £5,000 on payments made to crypto exchanges. While this may seem a small inconvenience for individual investors, crypto businesses in the UK will be hampered significantly because of their higher daily withdrawal amounts. In March, HSBC terminated the use of their credit cards to be used for purchasing cryptocurrencies.

Crypto executives have complained that FCA has stymied their processes for registering their businesses with the financial regulator. The recent collapses of more crypto-friendly banks like Silicon Valley Bank, Signature, and Silvergate exacerbate their hardship.

Policymakers involvement

Suspicions are rising that banks are not the true source of resistance; they are being led on by policymakers who have never supported the crypto industry. 

During the Citi Digital Money Symposium in London last week, Barclays's head of digital policy Nicole Sandler said that policymakers have avoided regulating the crypto industry because “they thought it would essentially die.” 

However, this approach has not worked, as the crypto industry has only grown. Sandler also remarked that politicians chose not to write crypto regulation because they wanted to “see where the market went.” 

Sunak’s initiative

Despite the resistance, Sunak does have support for his digital currency plans. Fintech firms in Britain already have infrastructure sandboxes in operation to test regulatory requirements. Leveraging the fintech community and those in the government who support Sunak’s initiative will be the best path forward for the Prime Minister. 

The UK crypto hub dream may never be realized if policymakers and bankers are not on board with the Prime Minister’s plan. If Sunak is to pull off his plan, he must render support from all sides; forcing legislation through, even with a large minority of naysayers, will further tie up Britain's crypto industry.