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The U.K. May Have Found Itself a Crypto-Friendly Prime Minister – Rishi Sunak

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2 years ago

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Rishi Sunak has won the Conservative Party’s leadership race and thus is set to become the UK’s Prime Minister and put an end to a political crisis that has affected the domestic economy to the point of recession. Should the crypto community be happy about the outcome?

How Did Sunak Find Himself as the Next UK Leader?

UK’s former finance minister, Rishi Sunak, is set to take the role of the country’s Prime Minister following the resignation of Liz Truss, who announced her departure last Thursday. After only 44 days in office, Truss admitted she couldn’t deliver the mandate, thus becoming the UK’s shortest-serving PM ever.

This turned out to be a huge and unexpected opportunity for Rishi Sunak, whose political career seemed to be over only two months ago when he lost the Conservative leadership election to Liz Truss. Nevertheless, after her term went from bad to worse, Truss was forced to give up her mandate and leave the door open to another candidate from the Conservatives, the governing party in the UK.

Following the end of Truss’ tenure, the Conservative Party was ready for a fast-tracked leadership race to fill the gap on Downing Street. However, it didn’t get to voting as former PM Boris Johnson – Sunak’s biggest competitor – pulled out of the leadership race last Sunday, leaving more chances to the former finance minister.

Sunak had to beat his only remaining contender, Penny Mordaunt – a former defense minister. Mordaunt came only behind Sunak in the original contest back in September. However, he also withdrew from the race moments just before members of Parliament (MPs) were about to announce their votes on Monday afternoon.

The circumstances have paved the way for an incredible comeback of Rishi Sunak, who has found himself as the next UK leader. Technically, Sunak will become PM on Tuesday, after Liz Truss officially tenders her resignation to King Charles, who will appoint the new PM immediately after that.

After the retreat of his party colleagues, Sunak said in his first public comments on Monday:

“I am humbled and honored to have the support of my parliamentary colleagues and to be elected as leader of the Conservative and Unionist Party.”

He has called for stability and unity as the UK economy is facing “a profound economic challenge.”

Is Sunak Crypto Friendly?

As the UK’s Chancellor of the Exchequer (the equivalent of finance minister), Rishi Sunak often touched upon the use of digital currencies, so the crypto community has already made an impression of his approach towards the crypto industry.

It turns out that the UK will have a crypto-friendly PM, as Sunak had previously revealed plans to make the country a global hub for crypto.

At the beginning of April, Sunak, who was finance minister under former PM Boris Johnson, announced plans to make Britain an international crypto tech hub, with stablecoins to be recognized as a valid form of payment.

The plan is part of a series of measures to make sure the UK financial services sector remained at the cutting edge of technology in order to attract investment and jobs. The broader package of crypto measures also includes:

  • Establishing a ‘financial market infrastructure sandbox’ to allow startups to experiment and innovate;
  • Create a Cryptoasset Engagement Group to work closely with the industry;
  • Find ways to make the UK tax system competitive to encourage the development of the ‘cryptoasset’ market;
  • Collaborate with the Royal Mint on a Non-Fungible Token (NFT) that had to be created by the end of summer as a symbol of the UK’s determination to adopt innovation.

Rishi Sunak commented back then:

“It’s my ambition to make the UK a global hub for cryptoasset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country. We want to see the businesses of tomorrow – and the jobs they create – here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term.”

Later in April, Sunak announced a new taskforce between the Treasury and the Bank of England to explore the viability of a potential central bank digital currency (CBDC). He said that the “digital pound,” which he dubbed Britcoin, might be used by businesses and households alongside cash and cards.

It remains to be seen how crypto-friendly Sunak truly is, with CBDCs being quite the opposite of decentralized cryptocurrencies, as they give the government unprecedented powers to control the money flow.

Is This an Opportunity for Bitcoin to Flourish as the UK Economy Struggles to Stay Afloat?

Sunak comes at a difficult moment for the British economy, which has been bleeding a lot, with Truss failing to find the right approach to put a cap on inflation. Latest data showed that UK’s annual inflation had exceeded the 10% mark again in September, driven by food prices. The consumer price index (CPI), which is the main indicator to monitor inflation, rose 0.5% in monthly terms. High inflation is forcing the central bank to tighten the monetary policy at an accelerated pace, which puts additional pressure on economic growth.

Last week, retail sales and business confidence data suggested a gloomy picture for the UK economy, which is closer to recession. The S&P Global’s UK composite purchasing managers index, which measures activity in the private sector, fell to a 21-month low of 47.1 in October from 49.1 in September, suggesting the UK’s economy has fallen into a recession amid skyrocketing inflation and political uncertainty, which finally ended with Rishi Sunak’s win in the race for PM role.

Can Bitcoin benefit from the pain of traditional markets? It’s early to suggest so, but the cryptocurrency can surely act as a refuge amid the recession.

At the end of September, the British pound fell to a record low against the US dollar, which might force many institutional investors to consider refuge assets, including Bitcoin.

The decline of the pound and the British economy might not necessarily be a catalyst for Bitcoin, but the cryptocurrency can consolidate its safe-haven status, especially as it has been hovering above the strong support level at $19,000 for months.

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Anatol is an experienced crypto/blockchain/DeFi journalist and analyst. Prior to joining the crypto space in 2017, he covered major forex pairs and US stocks, working for asset managers and brokerage firms, among others. He likes to dive deeper into each subject while maintaining professional conduct.