Is the UK a global crypto hub?
“UK FinTech is in a great place,” said John Glen; the Economic Secretary to the Treasury as he announced measures last month to make the UK a global hub for crypto.
by Joe Jowett, CEO and Co-founder, StrikeX
But the question is whether the actions promised by the UK Government will match the warm words he delivered to an audience of FinTech experts during the Innovate Finance Global Summit in London earlier this year.
If not, the UK’s leading position in crypto could be lost to more favourable jurisdictions.
Sentiment and perception
The UK is home to around 2,000 fintech companies; and London, a melting pot of entrepreneurial minds, financial expertise, investment capital, technology skills and regulators, is second only to the USA as the highest-ranked fintech ecosystem globally.
As part of that, the crypto sector is growing rapidly. One forecast suggests it will grow by more than 7% a year to be worth $2.2 billion by 2026. So, with a highly-skilled, tech-savvy workforce, attractive business and regulatory environments and a flexible labour market, the UK should be in a strong position to capitalise, with sophisticated jobs such as blockchain engineers and cryptocurrency developers.
But, so often in emerging sectors, sentiment can make an enormous difference in how people perceive things. Crypto entrepreneurs and investors – and the decisions they make – will be influenced significantly by the policymakers of the countries in which they do business.
Last month, the Governor of the Bank of England said that cryptocurrencies were the new “front line” in criminal scams, saying the technology created an “opportunity for the downright criminal.”
Contrast that with countries which are bending over backwards to welcome crypto entrepreneurs. Switzerland has perhaps gone the furthest passing blockchain laws and licensing two crypto banks, while Dubai is racing to become a haven for the global crypto industry by offering virtual asset licenses.
The US is making surges too, with President Biden recently ordering the most wide-reaching effort by the federal government to study and potentially regulate cryptocurrencies – an initiative that could see regulators closer to permitting spot cryptocurrency ETFs on the US markets.
In this context then, it’s not surprising that some commentators have suggested the Government’s moves to keep the UK as a leading global crypto hub lag behind many other nations.
The UK’s position
To attract companies, entrepreneurs and investors keen on crypto, the UK needs to commit to investment in a regulatory framework that fosters the national crypto economy and safeguards it without hindering innovation.
The most eye-catching of the Government’s announcements last month, at least as far as the headline writers were concerned, was commissioning the Royal Mint to produce an NFT which will be available by the summer. The Government heralded it “an emblem of their forward-looking approach.”
But beyond that, there were actually some positive moves. This month, the first of several meetings between industry leaders and the FCA, called “crypto sprints” will allow the industry to work with regulators to drive the shape of future regulation. They will also work on a project looking at the legal status of decentralized autonomous organisations (DAOs).
There are moves to look at existing laws governing electronic money which will be adapted to include stablecoins, bringing them within the remit of the FCA and thus paving the way for them to be used as a form of payment.
Finally, blockchain technology, a sector growing so rapidly that the UK simply cannot afford to ignore it. The UK government has announced it will explore the use of Distributed Ledger Technologies (DLTs) in financial markets, create a financial markets infrastructure sandbox and consider using DLTs for sovereign debt instruments.
From the emergence of Silicon Roundabout in the early noughties to the UK being a global tech powerhouse today – recently valued at more than $1 trillion – entrepreneurs, investors and industry have demonstrated their appetite to use the UK’s attractiveness to international talent and finance to transform it into a hub where nascent technologies and ideas can be transformed into world-class tech businesses.
Crypto is the next step in the UK’s continued growth in digital and technology, it is essential that a world-class infrastructure is built with regulation proportionate to the risk, to boost the modern 21st-century economy and allow crypto to thrive.
January 27, 2023
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