Key learning points
- Rishi Sunak has emerged as the UK’s next expected prime minister.
- Rishi Sunak seems to have a positive view of crypto, blockchain and distributed ledger technologies.
- While the way forward is uncertain, his appointment could well lead to a shift in pro-crypto policy in the UK
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The appointment of Rishi Sunak as the new UK Prime Minister could benefit the emerging crypto industry in the UK.
The United Kingdom gets a new Prime Minister
Rishi Sunak will be the next Prime Minister of the United Kingdom.
The news broke Monday after rival candidates Penny Mordaunt and former Prime Minister Boris Johnson withdrew from the Conservative Party leadership election, leaving Sunak the de facto winner.
Following the resignation of the previous prime minister, Liz Truss, on October 20, the ruling Conservative Party began the process of electing a new leader and prime minister. Truss, who took over from Boris Johnson on September 5, was pressured to resign after just 44 days in office. Her “mini-budget” economic plans, which included significant tax breaks for top incomes, drew widespread criticism from both the general public and members of her own cabinet.
Sunak inherits the British premiership at a turbulent time. In 2022, rising inflation has put pressure on the global economy. In the UK, the consumer price index registered a 10.1% year-on-year increase in September, returning to its July high and indicating that inflation is likely to remain high for longer. Energy supply problems due to Russia’s invasion of Ukraine have only exacerbated the UK’s economic woes, sending domestic energy bills up a further 80% in early October.
How Sunak will deal with the UK’s pressing economic problems is still unknown. The new prime minister has yet to form a cabinet or present policy plans to the general public. While Sunak’s economic strategy is still under wraps, his appointment may be a continuation of several pro-crypto policy decisions made during his tenure as finance minister between 2020 and 2022.
Sunak’s Crypto Point of View
Rishi Sunak seems to have a positive view of crypto, blockchain and distributed ledger technologies.
When Sunak took office as Chancellor of the Exchequer in April 2021, he suggested that HM Treasury and the Bank of England put together a task force to look into the creation of a central bank digital currency. CBDCs, as they are more commonly known, are digital currencies issued by a central bank rather than a commercial bank. They are generally believed to use blockchain technology to verify transactions between parties, similar to the Bitcoin or Ethereum networks.
The exploration of a CBDC aligns with the Treasury’s aim to help fintech companies scale up and ensure the UK remains at the forefront of digitizing finance. To that end, the new task force would also explore the use of distributed ledger technology for private sector applications.
In April 2022, Sunak doubled down on his commitment to crypto as he released plans to turn the UK into a global crypto technology hub. At the forefront of these plans was the call for stablecoins to be recognized as a valid form of payment, a move that could significantly boost the UK crypto industry.
The report also emphasized that the “financial market infrastructure sandbox” built in 2015 would continue to allow crypto companies in the UK to innovate without fear of clashing with regulators. In addition, the Treasury would work with the Royal Mint in producing an NFT and explore ways to improve the competitiveness of the UK tax system to encourage further crypto development. “It is my ambition to make the UK a global hub for cryptoasset technology, and the measures we outlined today will ensure that businesses in this country can invest, innovate and scale,” said Sunak.
Under Sunak’s chancellorship, the British government’s pro-crypto stance continued. HM Treasury confirmed that stablecoin legislation would be part of the new UK Financial Services and Markets Bill. It is also worth noting that the UK government’s approach to crypto regulation has been very fair to industry stakeholders. The Treasury has issued multiple “calls for evidence” and solicited public feedback, such as when it solicited the views of investors, professionals and companies involved in decentralized finance to help draft tax legislation.
When Sunak stepped down as Chancellor of the Exchequer ahead of Prime Minister Boris Johnson’s resignation on July 7, it cast doubt on the UK’s pro-crypto approach. There was no guarantee that the next government would promote crypto innovation or implement fair regulation. Nadhim Zahawi, the interim chief of finance after Sunak’s resignation, had previously indicated his preference for blockchain technology. However, for Zahawi’s replacement, Kwasi Kwarteng, it was unclear whether he would continue Sunak’s pro-crypto commitments.
With Sunak poised to return to government – as Prime Minister no less – the future of crypto innovation and regulation in the UK looks clearer. In his new role, Sunak is likely to appoint a finance minister who shares his positive view of crypto technology. With Sunak becoming the third British prime minister to take office since the last general election in 2019, his future is far from certain. He will have to convince both MPs and the general public that he is up to the job to avoid being pressured to call an election (current poll data indicates he was likely to lose an election to the opposition Labor Party in the UK). While Sunak’s appointment is generally good news for crypto in the UK, it remains to be seen whether he can maintain his position in the coming months.
Disclosure: At the time of writing, the author of this piece owned ETH, BTC, and several other cryptocurrencies.