The Economic Potential of Decentralisation

Economic analysis we have commissioned has shown that, by 2035, the UK could see £40bn of economic value from Crypto and Web3.

Our new report, ‘The Economic Potential of Decentralisation’, shows that growth in the use of stablecoins, DLT-based User Generated Content (such as social media), and the cross-section of blockchain and AI will be the key drivers of this growth.

Crypto and Web3 is already a significant, and growing sector in the UK. Recent announcements from both HMT and the FCA have progressed some elements of Crypto and Web3 regulation. But this progress is not quick enough, with firm policy papers not expected from the FCA until 2026 at the earliest.

Even more importantly, current Government thinking lacks an appropriate regime for functionally decentralised systems, a foundational component of Crypto and Web3. This means that startups and systems that wish to decentralise – a necessary process to take advantage of Crypto and Web3’s potential – are incentivised against doing so.

With the US in particular moving quickly ahead with a proportionate regulatory regime for cryptoassets, the UK needs to accelerate its progress and provide a home for functionally decentralised systems.

That’s why we’re calling for the Government to:

Develop frameworks for the new internet era: Establish an objective and clear framework for measuring decentralisation, ensuring that protocols meet rigorous standards before being classified as such.

Explicitly exclude airdrops from licensing and disclosure requirements: In line with HMT’s proposed regulatory regime for cryptoassets, formally exempt airdrops from financial services licensing and disclosure requirements to avoid stifling innovation in early-stage crypto startups.

Tailor requirements for cryptoasset disclosures: Calibrate disclosure requirements to the risks of cryptoassets, discerning between centralised and decentralised protocols, and protocols involving ongoing efforts versus those that do not.

Prevent market abuse: In furtherance of the goals of the FCA’s proposed Market Abuse regime, introduce a mandatory post-listing lock-up period for insiders to prevent market manipulation in systems that are not yet fully decentralised.

These changes will allow for true decentralisation, and with growth more important than ever, unlock the £40bn of economic value the UK needs.