The UK's Stance on Bitcoin Is Undermining Its Position as a Global Financial Hub

In recent months, the UK's Chancellor of the Exchequer Jeremy Hunt has reportedly met with the boss of Shein, the Chinese-founded fashion retailer, to encourage the company to launch its initial public offering on the London Stock Exchange.

The Financial Conduct Authority (FCA) has a proud history of excellence and innovation in both financial services and in computer science. Yet its regulatory approach to bitcoin, which sits at the intersection between these disciplines, is undermining that position. In recent months, the Financial Conduct Authority (FCA) has created uncertainty, driven businesses offshore, and is damaging the UK’s competitiveness in digital finance.

This was evident at the Bitcoin for Institutions event, held recently in London at The Law Society, which brought together investors, policymakers, and industry leaders to assess bitcoin’s growing significance. As institutions are making decisive moves to integrate bitcoin into their strategies, the event highlighted how regulatory uncertainty, restrictive policies, and a risk-averse approach are putting the UK at a disadvantage.

While other jurisdictions recognise Bitcoin’s role in institutional finance and are acting accordingly, the message from the event was clear: the UK risks being left behind as institutions elsewhere continue to diversify their portfolios with the digital asset.

At a glance: The UK is lagging behind in bitcoin adoption as institutions elsewhere diversify their portfolios with the digital asset.

Rising Institutional Interest In Bitcoin

The event, which focused on the burgeoning landscape of bitcoin-related products and services catering to institutional investors, unveiled a stark contrast between the U.S. and the UK in terms of the pace of institutional adoption.

While the U.S. is witnessing an influx of bitcoin ETFs, pension funds investing in the digital asset, and corporate treasurers diversifying into bitcoin, the UK institutions are still largely exploring the asset class.

This difference was highlighted by several speakers, including Allen Farrington, co-founder of Axiom, a bitcoin-native investment firm focused on capital deployment in the bitcoin economy, who described how bitcoin is forming the basis of a viable institutional asset class.

Despite bitcoin being the best-performing asset of the decade and having achieved a level of price stability unmatched by fiat currencies, rendering it suitable for long-term financial planning, UK institutions are lagging behind.

This lag is attributed to the role of the FCA, which is tasked with ensuring financial stability and safeguarding consumers but has inadvertently become a barrier to innovation.

As a result, businesses have been driven out of the UK, either by regulatory hostility or by deciding that the cost of compliance with poorly thought-out regulation is too high.

However, despite the setbacks, there is hope that the tide might be turning.

"Many U.S. companies have started incorporating bitcoin into their financial planning, and many others are well down the road," explained Andrew Hohns, founder and CEO of Newmarket Investment Management. "In the UK, institutional awareness of the benefits of bitcoin is more nascent, but the topic will move closer to center stage as corporate and sovereign game theory quickly take hold."

He further highlighted the urgency, stating that given the potential of bitcoin and its record, the risk is not so much in owning bitcoin as it is in not owning it, a sentiment shared by Dominic Frisby, who pointed out the implications of ignoring an asset class that has consistently outperformed over a 15-year period.

Discussing the U.S. administration's stance on bitcoin, which includes President Donald Trump signing an executive order in early March 2025 to establish a Strategic Bitcoin Reserve, and the actions of the U.S. Congress, Steve Baker, who served as Minister of State in the Cabinet Office until July 2024, highlighted the contrast in attitude.

"It’s great that the U.S. is governed by a group of people who understand this and are thinking about it in terms of national interest and global competitiveness," said Baker, referring to the U.S. government's willingness to engage with and learn about bitcoin.

This contrasts with the UK, where there has been a preference for incumbents and a reluctance to engage with new technologies.

While the U.S. and other jurisdictions, such as the UAE and Singapore, are attracting capital and talent by setting up frameworks that differentiate between bitcoin and speculative cryptoassets, the FCA has created a framework that lumps them together.

This approach disregards the unique characteristics of bitcoin as a decentralized monetary network, a point highlighted by Adrian Cannon from Musqet, who noted that bitcoin is fundamentally different from other cryptoassets and that its revolutionary nature in ideas and concepts does not fit neatly within existing regulatory and banking frameworks.

"It feels like there’s a mismatch between what they’re trying to do and the problems they’re trying to solve," Cannon said, referring to the shortcomings of the current regulatory thinking.

The British government is rolling out a new initiative called the Regulatory Innovation Office, which is intended to reign in overzealous regulators who are seen as stifling innovation with paperwork and red tape.

However, according to Baroness Claire Fox, who sits in the House of Lords and has been following the government's efforts, the reality is a system of self-replicating bureaucracy, with quangoes of regulators who are not accountable to anyone