- Prime Minister Rishi Sunak is faced with the UK’s economic crisis, which has deepened due to the struggles of some regions to return to pre-pandemic levels.
- Considering Sunak’s background, crypto enthusiasts are optimistic about the future of virtual assets and cryptocurrencies in the country.
- During his time as Finance Minister, Sunak worked to promote the UK as a cryptocurrency hub, but also expressed his desire for a U.K. central bank digital currency.
- Legislators in the UK recently voted to categorize cryptocurrency as a regulated financial instrument.
The United Kingdom has endured an extensive period of political turmoil, triggered by global economic unrest, with the embattled country having three Prime Ministers in as many months.
The emergence of Rishi Sunak as the new Prime Minister represents a continuation of the Conservative Party’s tenure in leading the UK, and would suggest a consistent approach to fiscal policy. However, a closer look at the newly elected PM’s background indicates an optimistic future for cryptocurrency and virtual assets in the territory.
The King received The Rt Hon Rishi Sunak MP at Buckingham Palace today.— The Royal Family (@RoyalFamily) October 25, 2022
His Majesty asked him to form a new Administration. Mr. Sunak accepted His Majesty's offer and was appointed Prime Minister and First Lord of the Treasury. pic.twitter.com/UnT3jMS8so
Economic Downturn in the United Kingdom
Like many other countries, the UK had been fighting inflation even before Rishi Sunak took office. The UK’s economy dipped 0.6% in June 2022 as it registered polarised development at a regional level. The struggles of these regions have only deepened as they battle to return to pre-pandemic levels.
These issues triggered a regional imbalance in growth, however, as economic output reached levels 0.9% higher than pre-pandemic in February 2020. The piling pressures as the economic downturn continued unabated eventually led to the resignation of Boris Johnson in July 2022.
As Liz Truss came aboard as the next PM 52 days ago, She focused her efforts on turning the UK’s economy around. Prime Minister Truss therefore introduced a mini tax-cutting budget, but the measure backfired, leading to greater unrest in the financial markets.
On September 23rd, the Finance Minister under Truss, Kwasi Kwarteng, unveiled a budget that ushered in a difficult period for the UK bond market. The budget failed to address its intended targets, and truss was forced to fire the newly appointed Finance Minister. In the aftermath, Jeremy Hunt was appointed Finance Minister, at which time many of these policies were withdrawn.
The former PM swiftly apologized for the policies, while maintaining that they had aimed to support households with energy bills. Truss further underlined that the policies were an attempt to cut the rate of national insurance. The controversies serve to highlight the severe economic crisis faced by the United Kingdom, and the massive task ahead of Rishi Sunak.
In this regard, the experience of the new Prime Minister as a former Chancellor of the Exchequer could prove instrumental in solving the present challenges. Moreover, many expect cryptocurrency to take center stage in Sunak’s quest to reignite the country’s economy.
Rishi Sunak and His Previous Encounters With Digital Assets
Sunak’s appointment as PM could hold good tidings for cryptocurrency due to his previous relationship with the industry. In April 2022, while Sunak was still Finance Minister, the UK government announced its intention to make the country a cryptocurrency hub.
“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,” Rishi remarked in a press release.
During that period, Sunak worked to promote the UK financial sector as a force to be reckoned with as a way to attract more investors.
The former Finance Minister further voiced his support for the proper regulation of cryptocurrency as a means of helping the industry thrive as he sought to work with prominent industry stakeholders. It is important to note, however, that this plan was centered around stablecoins.
Outlining his support of the industry further, Rishi Sunak urged the Royal Mint to consider minting NFTs. On the other hand, despite his enthusiasm for the virtual assets sector, Sunak shares the sentiment held by many governments of caution towards adopting cryptocurrencies.
In 2021, as Finance Minister, Rishi Sunak, expressed his desire for the introduction of a UK central bank digital currency, otherwise known as “Britcoin.” central bank digital currencies (CBDCs) are digital tokens issued and regulated by central banks linked to the value of a country’s fiat currency. Crypto enthusiasts typically have a pessimistic outlook towards CBDCs, given their full control by central banks, which inherently suggests less privacy for users.
A Bittersweet Situation for Digital Assets in the UK
According to a press release from the Financial Conduct Authority (FCA), cryptoassets are considered to be “very high-risk, speculative investments.”
In 2019, the FCA made it mandatory for cryptocurrency exchanges looking to operate in the country to first register with the financial regulator. Likewise, holders must pay a certain percentage of their cryptocurrency holdings as tax. In fact, failing to pay taxes on crytocurrency gains is a punishable offense in the United Kingdom.
New regulatory powers were further introduced in January 2020, allowing authorities to manage the risk of money laundering and counter-terrorist financing associated with crypto asset businesses.
However, many hope that Rishi Sunak’s appointment as Prime Minister could result in a more structured regulatory framework for digital assets in the United Kingdom, but worry that a CBDC may compete with digital assets. In this sense, Rishi Sunak’s crypto-friendly reputation in the UK is somewhat bittersweet for digital assets.
In related news, The House of Commons recently approved amendments to the ‘Financial Services and Markets Bill‘ to include cryptocurrencies as regulated financial instruments and products within its jurisdiction.
Mixed Reactions From the Community
The appointment of Rishi Sunak as Prime Minister of the UK has generated a host of reactions in the cryptocurrency space. Among the responses is the opinion of Rajagopal Menon, Vice President of WazirX.
“Rishi Sunak is a fintech evangelist. His becoming PM is a big positive for crypto. Sunak stated his intention to make the UK a crypto hub while serving as chancellor,” Menon stated.
People are calling the UK’s new unelected Prime Minister Rishi Sunak “crypto friendly”— Layah Heilpern (@LayahHeilpern) October 25, 2022
Let me be clear, he’s CBDC friendly not crypto friendly.
The two comments reflect a division in the cryptocurrency space towards Rishi Sunak’s position as Prime Minister. Ultimately, cryptocurrency enthusiasts will keep their fingers crossed as the new Prime Minister embarks on a journey to address the UK’s economic crisis.
On the Flipside
- While Rishi Sunak may appear to have a crypto-friendly attitude, his support for CBDCs has led some cryptocurrency enthusiasts to hold a pessimistic view.
Why You Should Care
As a former Finance Minister, Rishi Sunak has considerable experience in the crypto sector, an experience which is expected to herald a significant change in the UK’s blockchain industry over the next few years.
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