From October 8th, any and all firms — including those overseas — marketing crypto assets to UK customers need to abide by new measures which aim to crackdown on misleading promotions and incentives for investing in crypto. 

This legislation comes on the heels of other moves by the FCA looking to posture the UK as an international crypto hub, with the aim being to create rules that work for the industry players, but also protect consumers.

However, crypto is unique in nature, making it hard to pin down and regulate. It requires a coordinated global effort, as well as strong national guidelines to both attract new business and safeguard existing organisations. 

The first crypto coin, Bitcoin, emerged following the 2008 financial crash, which saw the FTSE 100 drop 31% between January and December. Crypto was touted as the anecdote to the volatility of the banking system, and late stage capitalism in general. It democratised and decentralised the value of the coin, and also established a transformative new technology in blockchain which many products can be built on. 

Once again, during a time of social and economic uncertainty following the pandemic, Bitcoin reached its all-time high, with values exceeding over $65,000 (£53,500) in November of 2021. Bitcoin now sits at just over £23,000. 

The epic highs and dramatic lows of crypto assets have driven away some casual investors, and those who never dabbled in the first place often see the sector as somewhat of a ‘wild west’. 

Being a Crypto Exchange CEO in 2023

Linch spent most of his career as a lawyer specialising in financial services for Shearman & Sterling LLP. He wanted to get in at the ground level of what he believes is a technology that has the potential to change the way the world does finance. 

“Everything is ‘disruptive’ these days,” he said, “ but I think crypto, or at least blockchain technology, seems to me to be genuinely disruptive in a way like nothing we’ve ever seen in our lifetimes.”

“That’s why I threw myself into crypto,” said Linch, who spent two years as general counsel for the firm before becoming CEO. “I joined in 2021, which in crypto terms is about 45 years ago at the rates of change in the industry.”

Bittrex was founded in 2014 on three guiding principles. The first two are consistent with many other crypto firms – innovation and security. However, the third principle, regulation, underscores the company’s long term commitment to pushing for cohesive rules in the crypto asset sphere. 

According to him, when the exchange first came on the scene, the founders got an abundance of backlash for pushing for regulation. “Now, a decade later, I don’t think anybody – at least not on the respectable side of things – advocates for an unregulated way of doing crypto,” he said.

“There’s still some people out there that cling on to the old ‘wild west’ days, but those people, thankfully, aren’t taken seriously.”

UK Crypto Regulations Are Lacking 

In the UK, the ‘wild west’ days have seemingly passed, but at the expense of market freedoms which made the technology into what it is today. This is not to say that any efforts made on the part of the UK government to wrangle the crypto asset sphere should be rescinded. Rather, there should be a more holistic approach to the matter, instead of moves that target small parts of the issues.  

According to Linch, the new marketing rule is one of various measures in place which demonstrates why regulation authorities and governments need to have a cohesive plan to coordinate these efforts, something he says is missing in the UK right now. 

“In this instance, the financial promotion rules come into effect, but there are no substantive regulatory rules yet,” he said. Other jurisdictions, such as the EU, have introduced frameworks to regulate crypto assets, such as Markets in Crypto-Assets Regulation (MiCA).

The UK Government on the other hand has only published a consultation paper on the future regulatory regime. “Come Sunday, there is going to be financial promotion rules without the equivalent regulated activity,” said Linch.

“They don’t need to reinvent the wheel; there are enough models out there now that we know what it’s going to look like,” he said. “I mean, I could write it for them.” 

As of right now, Linch’s company, Bittrex Global, is registered in Liechtenstein. But Linch says if there were a regulatory regime in the UK that was fit for purpose, he would be the “first in line to knock on that door and submit my application.”

Bittrex Global is one of many crypto exchanges which could be attracted to operate in the UK under the right circumstances. According to Linch, when the UK released its consultation paper in February this year, the exchange tried to get registered in the UK. “It is now October, and nothing’s happened,” he said.

“I can’t sit around and wait forever. I know that I need the regulated entity in this time zone. I would have loved for it to be in the UK, but if you don’t create it, I can’t come.”

“We all know that the Prime Minister is in favour of creating this vision for a crypto hub, but people can’t operate and execute a plan on a nice speech from No.10. They can only operate on a plan if there’s something concrete for them to latch on to,” said Linch. 

Recommended reading

• UK Gov Sets Out Crypto Regulations
• FCA Introduces New Rules for Marketing Crypto
• G20 Leaders Agree on New Crypto Asset Framework

International Efforts

Early last month, G20 countries met in New Delhi, and agreed on a new crypto asset reporting framework. This will have countries that are part of the G20 — which makes up 60% of the world’s population — exchange information on crypto transactions annually.

Everything from unregulated crypto exchanges to wallet providers, to give tax authorities better visibility into crypto coins like Bitcoin and Ethereum, as well as the people behind the transactions. 

Looking at the work being done by the G20, and other international standard setting organisations like the International Organization of Securities Commissions (IOSCO), Linch notes that they are great at creating a situation where regulatory arbitrage is no longer a concern. 

“If you go and invest in shares, you know that, whether you’re buying shares on the New York Stock Exchange or London Stock Exchange, you’re doing the same kind of thing and the same kind of way,” he said. 

“I couldn’t have said that sentence in the 80s,” he continued. “We had 40 years to create these rules and get to a situation. In crypto we’ve had two or three years of actual concerted effort, and even then not that much effort. So it’s not surprising that there’s a lot of differentiation and a lack of harmony across jurisdictions.”

“So what G20 and IOSCO can do is say: ‘These are the minimum criteria for what a properly regulated crypto exchange should be doing. These are minimum criteria for what a properly regulated brokerage for crypto should be doing.’” According to him, these kinds of global minimal standards will ultimately benefit customers in the UK. 

Moving Forward

While crypto and blockchain is still novel, there remains to be a lot of untapped potential in it. 

The technology aims to democratise and decentralise one of the most powerful parts of our society. “Nobody is denying that it’s real and that it’s here to stay,” Linch asserted. 

“Five, ten years from now crypto will just be a part of the wider financial services industry,” he continued. Linch said the future of crypto needs to be grown up, respected, and regulated, or else people won’t be interested and excited in investing in crypto. 

“At the moment, there’s a lot of things cutting in a lot of directions in the UK,” he said, describing the dichotomy between a government who wants to be a crypto hub, versus a regulator who wants to be more risk averse. 

“You need to have a guiding mind to actually coordinate these various efforts.”