Trump and the implications for digital assets in the UK
Think tank: Adam Smith Institute
Author(s): Toby Norfolk-Thompson; Ijeoma Okoli; Lord Ranger of Northwood; Maxwell Marlow
January 20, 2025
This report from UK think tank the Adam Smith Institute presents an analysis of President Trump’s potential impact on digital assets in the UK.
The report by the Adam Smith Institute characterises the inauguration of a pro-digital asset administration in the United States as a “Sputnik moment” for the United Kingdom’s financial sector. For several years, Britain benefited from a regulatory “safety haven” status while the US Securities and Exchange Commission pursued a strategy of regulation by enforcement, effectively driving firms and capital toward London. However, with the United States now committed to becoming the “crypto capital of the planet,” this competitive advantage has vanished.
The report argues that without immediate legislative action and a shift in regulatory temperament, the UK faces a significant exodus of talent and capital to a more deregulated American market, threatening its position as the world’s third-largest digital asset economy. Central to the report’s thesis is the need for a decisive pivot away from state-led initiatives, specifically the proposed Central Bank Digital Currency (CBDC). Described as a potential “surveillance coin,” the CBDC is viewed as a threat to both privacy and market competition that should be abandoned in favour of supporting private-sector stablecoins.
The paper calls for the UK Government to reform the Financial Conduct Authority’s (FCA) restrictive regulatory framework, which is currently identified as a major bottleneck for innovation. By providing clear legal definitions for digital assets and expediting the authorisation process for crypto-asset firms, the UK can leverage its existing fintech expertise to compete with a resurgent and deregulated Wall Street.
Ultimately, the analysis posits that the UK must choose between embracing market-driven innovation or accepting a state of decline in the global financial hierarchy.
The report suggests that the Government must act with urgency to ensure that British banks are not discouraged from engaging with the sector and that the regulatory environment remains attractive to international entrepreneurs.
By prioritising consumer choice and entrepreneurial freedom over bureaucratic caution, the UK has the potential to lead the next wave of financial tokenisation and blockchain integration. Failure to do so risks leaving the City of London as a mere spectator in a digital economy increasingly dominated by the United States.
