Snap U.K. election sends crypto industry scrambling to court Labour allies

The event was organized by US-based crypto exchange Coinbase Global Inc. and its adviser, former Conservative Chancellor of the Exchequer George Osborne. But while senior members of both of Britain’s two dominant political parties were there, the influence campaign had increasingly targeted Labour, given its large and consistent lead in polls. 

Sunak’s decision to call a July 4 election validated that approach, but it also underscored the sense of uncertainty hanging over crypto in the UK. Labour hasn’t been in power since 2010, when Bitcoin was worth less than a dollar. And its leader, Keir Starmer, has been mostly silent on cryptocurrencies. 

“Everyone is trying to guess,” what Starmer intends to do in crypto regulation should Labour win, said Laura Navaratnam, UK policy lead at the Crypto Council for Innovation. “Part of the answer here is quite possibly that Labour don’t know what they think yet.”

In what’s arguably the most important electoral cycle ever for crypto, both the UK and US are choosing their leaders in a span of just four months. Since the last time the two countries went to the polls, the industry has weathered a brutal market slump and its toughest regulatory crackdown. 

But the past year brought a stunning recovery, capped by the approval of exchange-traded products linked to Bitcoin and Ether on both sides of the Atlantic. In the US, the industry is ramping up donations to crypto-friendly candidates to keep the momentum going. In the UK, it has focused on sidling up to Starmer and the party he leads. 

The UK is Coinbase’s second-largest market, yet many in the industry view the country as a laggard in crypto regulation. That’s in spite of a 2022 pledge by Sunak himself, shortly before he became prime minister, to make the country a key hub for the sector. Since then, the European Union (from which the UK voted in 2016 to part ways) has adopted sweeping crypto legislation, and rival financial centers like Hong Kong and Dubai have introduced new regulations. 

By contrast, the UK mostly relies on a patchwork of crypto rules mainly enforced by the Financial Conduct Authority. Plans laid out by the Treasury in February last year call for digital assets to be regulated similarly to traditional financial services. 

The FCA is expected to publish a first draft of its proposed crypto licensing regime before the end of the year, according to two people familiar with the matter. The regulator declined to comment. 

Here’s crypto’s UK wish list:

A Conservative government proposal to introduce secondary legislation around stablecoins — crypto tokens that are typically pegged to a currency like the dollar — failed to come to a vote before parliament was dissolved ahead of the election. It’s unclear how quickly it might reappear on the agenda under a Labour regime. 

With Labour consistently polling far ahead of the Tories since Liz Truss’s tumultuous and short-lived reign as prime minister last fall, the crypto lobby has been preparing for a changing of the political guard. 

In October, trade group CryptoUK held its first event attached to the annual Labour Conference in Liverpool. When Coinbase launched the Stand With Crypto lobbying program in the UK two months later, it did so in Manchester, a traditional Labour stronghold.  

“We’re fearful that if the government delays too long in getting a full regulatory package in place, we’re going to be way behind our competitors,” said CryptoUK board advisor Ian Taylor. A Labour win could usher in “a demographic shift that will hopefully want to engage with our sector,” he added. 

Reeves, Siddiq

With Starmer seemingly less concerned with digital assets, crypto executives have turned their attention to Rachel Reeves, Labour’s shadow chancellor, and Shadow City Minister Tulip Siddiq. In the event of a Labour win, it is likely those two who will oversee efforts to rehabilitate London’s status as a global financial center after Brexit. 

Coinbase hosted a breakfast roundtable with Reeves at the World Economic Forum in January. Executives including venture capital firm Andreessen Horowitz’s UK General Partner Sriram Krishnan and Stripe co-founder John Collison were also in attendance. 

Andreessen Horowitz, also known by its a16z moniker, is among the biggest VC backers of crypto startups. Stripe announced in April that it’s bringing back crypto payments to its platform. 

The next Labour government will work with the tech sector to bring jobs and prosperity to Britain.

Thank you to @sriramk for organising and @coinbase for hosting breakfast this morning. pic.twitter.com/xCxYXg3Ysf

— Rachel Reeves (@RachelReevesMP) January 18, 2024

At an April event in London, Siddiq said Labour wants to make the UK a “global hub” for tokenized securities — assets like stocks or bonds that are represented in the form of digital tokens on blockchains. Advocates say tokenization will make financial transactions faster and more transparent. 

Beyond picking out the potential future leaders to woo, preparing for a Labour government also means adjusting crypto’s political messaging, said the CCI’s Navaratnam.

Instead of publishing white papers on crypto regulation, companies have prioritized grassroots outreach in Labour strongholds like Manchester. And instead of threatening an exodus of startups if regulations doesn’t ease, Navaratnam said Labour will likely be more receptive to demonstrating how digital assets can help ordinary people.

“The way we have engaged with the Conservative government has been very much in a pro-market, pro-competition lens,” she said. “I don’t think the same conversation will stand with a Labour government.”