Britain has been making some bold bets on crypto in recent years. In 2020, the government announced plans to make Britain a “global hub” for cryptoasset technology. And in 2022, the Financial Conduct Authority (FCA) granted a license to Binance, one of the world’s largest crypto exchanges.
However, some critics have argued that these bets are misguided. They point out that the crypto market is highly volatile and unregulated. They also say that crypto is a risky investment that could leave consumers vulnerable to fraud.
The collapse of TerraUSD, which was supposed to be pegged to the U.S. dollar and is known as a stablecoin, has increased concerns about its reliability. TerraUSD lost its peg and value, wiping billions of dollars in investor funds.
Despite these concerns, the British government is doubling its crypto bets. In March 2023, the Treasury announced plans to introduce legislation to regulate the crypto industry. The government said the new rules would “protect consumers and ensure the U.K. remains at the forefront of crypto innovation.”
However, it remains to be seen whether the new rules will be enough to mitigate the risks associated with crypto. Only time will tell whether Britain’s bets on crypto will pay off.
Here are some of the arguments against Britain’s bets on crypto:
- Crypto is a highly volatile asset class. The price of Bitcoin, the most popular cryptocurrency, has fluctuated wildly in recent years. In 2017, the cost of Bitcoin surged to over $20,000. But by 2018, the price had dropped to under $4,000.
- Crypto is an unregulated asset class. There are no government regulations governing the crypto market. This means no one can protect consumers from fraud or scams.
- Crypto is a risky investment. There is no guarantee that the value of crypto will increase over time. There is a real risk that the value of crypto could plummet, wiping out investors’ funds.
Despite these risks, crypto has the potential to revolutionize the financial system. They argue that crypto could make sending money worldwide more accessible and cheaper. They also say crypto could provide a more secure way to store and manage our finances.
Only time will tell whether Britain’s bets on crypto will pay off. But for now, the government is willing to take a risk on this new technology.
However, there are also some potential risks associated with crypto:
- Crypto is a highly volatile asset class. The price of Bitcoin, the most popular cryptocurrency, has fluctuated wildly in recent years.
- Crypto is an unregulated asset class. There are no government regulations governing the crypto market. This means no one can protect consumers from fraud or scams.
- Crypto is a risky investment. There is no guarantee that the value of crypto will increase over time. There is a real risk that the value of crypto could plummet, wiping out investors’ funds.
Ultimately, whether or not Britain is still making dumb bets on crypto is a decision that each investor will have to make for themselves. There are certainly risks involved, but there are also potential benefits. Only time will tell whether the benefits will outweigh the risks.
The British government should proceed with caution regarding crypto. The risks are real, and there is no guarantee that the benefits will materialize. However, if the government is willing to take a chance on this new technology, it could reap big rewards.
In early June, the U.S. Securities and Exchange Commission sued Coinbase, the largest U.S. dollar crypto exchange, and Binance, the world’s largest crypto exchange, alleging in both cases that their exchange operations violated securities laws. Both companies treat the charges as life and death for their U.S. businesses.
Coinbase’s explicit hope is for Congress to write special new enabling laws. But this is unlikely when the public perceives crypto and politicians as synonymous with fraud. Crypto’s best lobbying efforts were filtered through Bankman-Fried’s Washington operations; with FTX out of the picture, even once-friendly politicians want to stay in the bag.
Since the crypto crash, a16z has tried to get into the various technologies currently being marketed as artificial intelligence—though investment in A.I. companies will only pay out on the yearslong start-up cycle. Sunak has also seized on A.I. as a possible way out of his troubles, including pitching the U.K. as “the geographical home of global A.I. safety regulation”—ignoring the currently-in-process E.U. Artificial Intelligence Act, which is much more likely to set the global tone.
Cryptocurrency is not a miracle. The mum-and-dad retail investors left last May. Institutional investors gave up soon after and abandoned the crypto sector with no plans to return. The magical crypto money tree is no more likely to drop pounds than it is to drop dollars.
