Words by Chris Wilson — Head of Compliance at CoinCorner
Well, it all seems like a bit of a mess doesn’t it? How long ago was the UK European Union Referendum? I’ll tell you how long: a long time ago. It was back on the 23rd June 2016, one thousand or so days ago, and to most ordinary people out there, it appears like not much has been achieved.
And with the 29th March deadline fast approaching this week and no deal agreed, no way forward agreed and a parliament that appears as split as the rest of the country, we have been thinking about the possible implications for CoinCorner and Bitcoin. I say possible because we have no way of knowing, we’re in uncharted territory.
What’s the impact on CoinCorner?
In terms of how Brexit might affect CoinCorner, our overall view is that it shouldn’t have too much of an impact whatever happens.
We’ve been keeping a close eye on the Brexit negotiations, including preparing our operations for all possible outcomes. The key areas of interest for us have been:
- European office — Would we need a European office to continue offering services to our European customers?
- Banking — Will we be subject to different banking requirements after Brexit?
- Regulations — How will Brexit influence regulation around Bitcoin?
As a Bitcoin business, the nature of our industry is quite different from that of a company which sells physical goods. Where physical goods might be sourced from European countries and imported to the UK to be sold to customers (being hit with importation fees/charges along the way), Bitcoin is the opposite. It’s not an imported good and as such doesn’t face any of the importation challenges that are likely to be affected by Brexit.
What’s the impact on Bitcoin?
There are several key scenarios to consider when questioning how Bitcoin may be impacted more generally by Brexit:
- Scenario 1 — Crash out with no deal. Good news for Bitcoin?
- Scenario 2 — Theresa May’s deal finally gets parliamentary approval. Good news for Bitcoin?
- Scenario 3 — A long delay to Brexit and even more uncertainty. Good news for Bitcoin?
Why in all three scenarios do we think it could be good news for Bitcoin?
We know that traditional markets such as stock and foreign exchange don’t like uncertainty. We also know that the bitcoin price is not correlated, doesn’t move inline, with those traditional markets. Is there in fact, an argument to say that Bitcoin and other cryptocurrencies may thrive during market turmoil? Perhaps there is.
The recent hyper-inflation in Venezuela which has effectively seen its currency become valueless is a prime example to look at. A cup of coffee has increased in price over the past year by 349,900%, according to Bloomberg. This has led large parts of the population to look for an alternative, safe-haven currency, with many turning to Bitcoin.
Does Bitcoin offer protection in time of turmoil? Is Bitcoin becoming a safe-haven? Wow, now there’s a thought! Let’s just repeat that… Bitcoin, a safe-haven?
It could just well be, after all Bitcoin is politically neutral, borderless and decentralised. And for a large number of Venezuelans, storing their money in a digital wallet is much more appealing than holding the local currency.
Even with all the uncertainty during the last few months, the FCA has managed to set aside some time to publish guidance on ‘cryptoassets’ for consultation, with one of their primary aims to protect consumers from harm. The consultation closes in early April and we expect a policy statement in the summer.
Essentially, certain tokens will be classified in certain ways and the regulatory implications will be dependent on the classification. Exchange tokens which are not issued or backed by any central authority and are intended and designed to be used as a means of exchange will not be caught, whereas Security Tokens that have specific characteristics that meet the definition of a Specified Investment, like a share, will be caught.
At CoinCorner we recognise the role of increased regulation in helping to open up Bitcoin to the masses. We believe in Bitcoin and want to be part of the revolution to improve financial services.
With all the unknowns that come with Brexit, we don’t know if the EU will take a similar approach to the FCA and with the potential loss of passporting there will likely be an increased regulatory burden. Will crypto companies be able to operate in Europe? Will they need a local presence? Will the rules be different?
Although no one knows the answers yet, we’re prepared to face Brexit and react accordingly to prevent any interruption to our services.