Unlocking UK's Web3 Potential: Time to Update KYC?

Last Updated October 9th 2023
3 Min Read

Key Takeaways -

  • The UK has a unique opportunity to lead in Web3, aided by strategic proposals from Policy Exchange.
  • Easing KYC norms and limiting DAO liabilities could make the UK a more attractive hub for crypto businesses.
  • The UK government is already tightening crypto regulations, including considering a ban on cold calls promoting crypto investments.

The United Kingdom is at a pivotal moment. As Web3 companies exit the U.S. due to regulatory uncertainties, the UK has a unique opportunity to lead. A recent report from Policy Exchange serves as a roadmap, offering ten strategic proposals to guide the UK government.

The DAO Conundrum

In the United States, a concerning legal precedent has been set that makes individuals who own DAO (Decentralized Autonomous Organizations) tokens potentially liable for the actions of the organization. The Policy Exchange report suggests limiting such legal liabilities as a solution. Industry experts are of the opinion that this move could be a significant game-changer, positioning the UK as a more attractive and safer hub for DAOs and their participants.

Rethinking KYC

According to the report, the Financial Conduct Authority (FCA), which serves as the UK's primary financial regulatory body, is in need of a significant overhaul. The report specifically advocates for easing the existing Know Your Customer (KYC) norms that are currently in place. It goes further to encourage the adoption of innovative identification techniques, such as digital IDs and blockchain analytics tools. Implementing these changes could make the KYC process not only more efficient but also more user-friendly, thereby attracting more businesses to the UK.

Beyond KYC - Additional Proposals

Beyond KYC - Additional Proposals

The Policy Exchange report goes beyond just KYC regulations. It also puts forth the idea that private issuers of stablecoins could be allowed to keep their reserves in the Bank of England. Furthermore, the report proposes the introduction of a specialized "tax wrapper" designed for crypto exchanges. There's also mention of launching a new innovation sandbox initiative, which would fall under the jurisdiction of the Department for Science, Innovation, and Technology.

The Regulatory Landscape

The UK government is already in the process of tightening its regulatory grip on the cryptocurrency sector. The Treasury is actively considering the possibility of banning cold calls that aim to promote cryptocurrency investments to the public. On a similar note, the FCA has not been shy about issuing stern warnings to local cryptocurrency businesses, demanding that they adhere strictly to existing marketing regulations or face severe penalties.

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