Why the UK’s Crypto Gold Rush Could Be Coming to an End

Recent fluctuations in the crypto market have seen Bitcoin make a partial recovery, surpassing the $100,000 mark after Deepseek's new AI model rattled key US tech stocks. The model impacted the stock prices of the “Magnificent Seven” — Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla — and caused a six percent drop in Bitcoin's value yesterday.

While Bitcoin bounced back, the UK’s digital finance sector is struggling to maintain momentum, particularly as the US market shows increasing signs of dominance. After a boost from Trump's re-election, it’s becoming clear that the growing strength of the US crypto market is starting to overshadow the UK's efforts in the digital asset space.

In recent news, Eric Trump hinted at a "zero crypto tax policy" for US-based cryptocurrency companies, which could serve as an incentive for innovation and investment. However, this proposal would only eliminate capital gains tax for crypto companies in the US, while offshore crypto projects serving US clients would still face a 30 percent tax on capital gains. Despite not yet having legislative backing, Eric Trump's influence on his father’s administration has unsettled markets, leading to a decline in the value of non-US-based cryptocurrencies.

UK-based Radix, one of the country’s largest cryptocurrencies, has seen its price plummet by over 50% in the last month, and all major UK crypto tokens have suffered losses in response to the news.

Additionally, Trump ally Senator Ted Cruz has been vocal in challenging new tax regulations targeting decentralized finance, which would require firms to report user transaction data to tax authorities.

The challenge for the UK lies in the increasing dominance of US-based proposals and crypto policies. Trump’s campaign has proposed several crypto-friendly ideas, including a bitcoin reserve law that would require the US government to hold one million bitcoin, along with a more accommodating regulatory environment. Bitcoin spot ETFs, such as Blackrock’s iShares Bitcoin Trust, continue to see large inflows, reaching $57.9 billion in assets, while the UK still bans such investments.

Despite efforts by the UK government to create a more crypto-friendly environment, including attempts to attract venture capital firm Andreessen Horowitz to London, the firm chose to focus on the US market instead. This shift highlights the difficulties the UK faces in attracting and retaining major crypto players.

The UK’s crypto sector is further hindered by a lack of support from current officials. While former City minister Bim Afolami was a vocal proponent of pro-crypto regulation, his successor, Tulip Siddiq, has reportedly not made the sector a priority, even canceling meetings with crypto firms.

Moreover, since most cryptocurrencies are priced in US dollars, the weakened pound is making it more expensive for UK-based investors to purchase the same amount of crypto as before. With crypto firms increasingly flocking to the US, the UK’s regulatory stagnation is only accelerating this trend.