Beyond Brexit: Is UK's Fintech Strategy an Indication of London's Financial Sector Muscle?
Efforts to mainstream cryptocurrencies in financial services have gotten a major boost after the UK government launched a comprehensive Fintech Sector Strategy (FSS) last month. The news came just days after the G20 summit concluded in Argentina. During the summit, world economic leaders acknowledged the potential of crypto-assets to improve the efficiency of financial systems.
Strategic Focus One of the key issues that the FSS addresses is the assessment of cryptocurrencies and blockchain technology risk, as well as their potential. To do this, the strategy aims at creating a task force which consists of the Financial Conduct Authority, the Bank of England and HM treasury to look into how crypto-assets can be integrated into its financial sector.
According to Garth Howat, CEO of Baanx, this is a step in the right directon. “The new crypto-assets task force is a great idea by the UK government and we welcome their interest and oversight of the industry," he says.
On his part, Maksym Lenets, co-founder of REPU, sees that the move to launch a fintech strategy strengthens the UK’s role in the financial sector.
"According to the Fintech Sector Strategy document published by the UK Government, it can be concluded that the authorities in UK understand the importance of blockchain technology and its great potential in the near future,” he notes.
Regulatory Environment Some players feel that by launching a fintech strategy, the UK is likely to create a conducive regulatory environment for its implementation in the country. This could provide the means to develop a regulatory framework for the crypto-asset market that has largely remained unregulated in many countries.
Lenets says, “In my opinion the UK Government will put a good effort towards implementation of the distributed ledger technology and towards mitigation of crypto-asset related risk by, for example, imposing a good regulation for all market players, with strict but clear rules.”
Dr. Jeffrey Lin, CEO of GCOX, is confident that the move by the UK and the efforts by the Securities and Exchange Commission (SEC) in the US shows that a market framework is being drawn up within which crypto-assets can be adopted.
“The move by UK in setting up a crypto-assets task force to draw up the regulatory framework for the inclusion of blockchain into the financial system is a great move in thrusting UK into the forefront of crypto adoption and set itself as a global leader,” Lin notes.
In the US, the SEC has taken significant steps in enforcing existing securities laws. Just last month, the regulator sent summons to more than 80 initial coin offering (ICO) companies. Lin sees this move as a way of preparing the ground for the adoption of crypto-assets.
“The enforcement actions by SEC of US is also laying the groundwork for adoption of crypto tokens. In prosecuting crypto tokens that the SEC say are securities or fraud, they are in effect laying down what guidelines of what can or cannot be done, what has to be regulated and how it is to be regulated. This in effect is also creating a market framework for adoption of crypto tokens,” Lin says.
Growing Maturity By launching a fintech sector strategy, the UK is also sending a strong message that the financial sector in London is growing stronger after the country left the EU.
“London has long been one of the key financial centres of the world and companies like Baanx plan on ensuring this influence continues to grow long after we have left the EU. We are excited by the excellent support, interest and opportunities for innovation that are presented within the UK,” notes Baanx CEO of Howat.
On his part, GCOX CEO, Dr. Lin, says, “With Japan already embracing crypto tokens as legal tender and taking the lead in crypto adoption, I believe it will be a matter of time before others follow suit as the market evolves and matures. However, it is too early to say whether UK will become a global crypto-asset leader.”
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.