Speaking on the ‘Crypto Rebooted: 2021 and Beyond’ during day two of the IFGS conference, Barnaby Reynolds, global head of the Financial Services Industry Group, Shearman & Sterling, played down the significance of HM Treasury’s announcement yesterday regarding the regulation of stablecoin use the UK.
“The UK is thinking through how to regulate crypto, but the announcement yesterday to bring stablecoins into the payments regime is relatively minor.”
He continued that the two important markets to focus on insofar as crypto regulation are London and New York as these are where the global “pulse” is.
However, this is will be no small feat. “This is very complicated and dynamic, things are changing very quickly - what looks to be a risk turns out not to be, what looks to be peripheral turns out within months to be central and so on.” It is therefore a collaborative exercise between lawyers and regulators.
The key factor in the UK though, Reynolds explains, is the question of how to deal with retail. The ban on crypto trading in the UK is where the controversy lies, as the retail market so strongly wants access.
“How do we safely do that? While many are likely frustrated with the pace of regulators, the UK is actually moving quite quickly and is intellectually analysing how crypto can and should be categorised […] It must be done in a consistent, coherent way, not in some ‘gold rush’ way because we’ve seen that doesn’t work at least twice before.”
On a following panel session, a fellow lawyer also qualified his excitement regarding the stablecoin announcement made yesterday by John Glen MP.
John Salmon, global head of Blockchain & Digital Assets, Hogan Lovells stated that the “interesting words” to come from the announcement were “proportionate, tailored and dynamic legislation.”
“For me, it should be a bespoke regime. The only disappointment in the speech yesterday was ‘let’s put stablecoins into the e-money regime.’ The e-money regime doesn’t work at the moment, it’s quite clunky, so lets see how many changes there are and I’m trying to be optimistic.”
Speaking with Finextra ahead of the IFGS conference, Reynolds contextualised the topic area, stating that perhaps unsurprisingly, law and regulation is lagging crypto developments, since the very technique seeks to provide a systematic structure for market activity.
“The common law method of waiting for the market to reach a certain level of sophistication, and then legislating and regulating, is in principle the right one. It is also desirable to allow for theories to be tested and to evolve through tentative regulator guidance and the court system, where possible. However, the moment has now come to put a more permanent structure around this market, so that the benefits can be realised in full. That structure should be based on risk and remedies, based of course on the evidence we have so far.”
“The moment is an exciting one of opportunity. Various different ideas have emerged from legislators, regulators, judges, practitioners, academics and others from around the world. This discussion will revolve around the likely next steps and what the further stages should involve.”