Rishi Sunak’s government has already legislated to use stablecoins as a means of payment as he seeks to make the country a crypto hub.

The U.K. has confirmed it will extend tax breaks for investment managers to cover crypto assets, after Prime Minister Rishi Sunak said he wanted to make the country a crypto hub.

In October, minister Andrew Griffith said he wanted to “tentatively seize” crypto opportunities, and promised a consultation on how to use new legislative crypto powers contained in the Financial Services and Markets Bill before the Christmas holiday.

In a package of financial services reforms unveiled today, setting out how to replace European Union banking and financial-market laws, the Treasury said it would extend an existing tax break, which allows investors to use a U.K.-based manager without drawing extra tax liability, to the crypto sector. The change will be made via regulations this year.

The Treasury also said it will implement a “sandbox” to test out innovative financial market infrastructures next year, and will consult on a digital pound in the coming weeks.

In April, Rishi Sunak, then finance minister and now prime minister, said he wanted to make the U.K. a global crypto hub. While U.K. regulator the Financial Conduct Authority has already tentatively set out how it would use new crypto powers, some in the industry have warned that new advertising restrictions could prove unduly complex.

A Treasury spokesperson did not respond to a CoinDesk request for comment on the status of the wider consultation on crypto regulations.

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Archax aims to provide access to blockchain-based digital assets for institutional investors, acting as a bridge to traditional finance.

Abrdn (ABDN), one of the U.K.’s largest asset-management companies, has taken a stake in Archax, the first and only digital securities exchange to be regulated in the U.K.

The company, based in Edinburgh, Scotland, is now the exchange’s largest external shareholder, Archax said Friday. In an email, Abrdn declined to give the size of the stake or say how much it paid.

Asset managers in traditional finance are increasingly looking for ways of tapping into the digital asset industry. Today’s announcement follows soon after the world’s largest asset manager, BlackRock (BLK), unveiled a spot bitcoin private trust for U.S. institutional investors fresh from its partnership with crypto exchange Coinbase (COIN).

Archax aims to provide access to blockchain-based digital assets for institutional investors, acting as a bridge to traditional finance. It received registration from the U.K.’s Financial Conduct Authority (FCA) in August 2020, becoming the first exchange to offer digitized securities – tokenized versions of real-world assets – to do so.

“Archax is one of the most promising U.K. players in this next expected high growth area in finance – the use of digital and tokenized securities with same-day settlement. In that sense, the growth of the digital investment market is about much more than cryptocurrencies,” abrdn CEO Stephen Bird said in the statement.

“Archax is one of the most promising U.K. players in this next expected high growth area in finance – the use of digital and tokenized securities with same-day settlement. In that sense, the growth of the digital investment market is about much more than cryptocurrencies,” abrdn CEO Stephen Bird said in the statement.

Abrdn, which manages 464 billion British pounds ($564 billion) in assets, said it expects investors to use Archax as a route into investment opportunities in digital securities and connect existing offerings in a new way through tokenization of traditional assets.

Abrdn shares on the London Stock Exchange were up 0.17% at 173.15 pence at time of writing.

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Those wishing to submit evidence have until Aug. 31 to do so.

The U.K. government is seeking views from investors, professionals and companies on taxation of decentralized finance (DeFi) activities.

Specifically, the government wishes to gather evidence on the taxation of cryptoasset loans and staking, according to an announcement Tuesday.

“The government is interested in ascertaining whether administrative burdens and costs could be reduced for taxpayers engaging in this activity, and whether the tax treatment can be better aligned with the underlying economics of the transactions involved,” the announcement read.

Those wishing to submit evidence have until Aug. 31 to do so.
The government outlined a set of initiatives in April to make the U.K. a global crypto stronghold. Among them was conducting “major surgery” on the taxation system to “make it work more easily for crypto,” according to Economic Secretary John Glen.

In May, the government published a consultation aiming to reduce risk for investors holding stablecoins by giving the Bank of England power to appoint administrators to oversee insolvency arrangements of failed stablecoin issuers.

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Market instability in stablecoins will need to be taken into account, the FCA’s executive director for markets said.

The U.K.’s financial regulator and its finance ministry, the Treasury, will scrutinize the collapse of the Terra ecosystem’s crypto tokens while creating new rules for crypto assets, Bloomberg reported on Friday.

Recent market instability in stablecoins “will absolutely need to be taken into account” when the Financial Conduct Authority works with the Treasury to create the rules later this year, Sarah Pritchard, the FCA’s executive director for markets, told Bloomberg.

On May 13, Terra’s UST algorithmic stablecoin slumped as low as 23 cents, and the LUNA token, created to prevent the UST algorithmic stablecoin from being volatile, fell 96% at one point. An algorithmic stablecoin is one that in theory maintains its peg using only software and rules, meaning it is not necessarily backed by collateral. Instead, the token’s programming, or smart contract, can increase supply if the price is falling or reduce supply if the price is increasing.

In March, the U.K. said it will work on a new crypto regulatory package and planned to regulate stablecoins. In its consultation, the government proposed that algorithmic stablecoins should not be regulated.

The Treasury and the FCA were not immediately available to comment when contacted by CoinDesk on Friday.

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