By David Drake
Cryptocurrencies have been making headlines in global financial news for quite some time now, and it’s not about to stop anytime soon. Crypto-assets and their underlying blockchain are gaining popularity and different countries have started positioning themselves to lead the world in developing the best cryptocurrency ecosystems possible in an effort to attract global investors.
The UK is one such a country. Over the past two months, the country launched an enquiry into cryptocurrencies and a Fintech Sector Strategy. The strategy came just a few days after the G20 Summit concluded in Buenos Aires, Argentina where a Finance Ministerial Meeting took place. These moves send a strong message that the UK is getting ready to lead the global cryptocurrency market.
The UK has a great competitive advantage in the fintech market. In 2017, Deloitte declared London as the global fintech leader, the city still maintains the same status. The UK government has adopted a supporting regulatory approach that makes it easier for developers to establish and operate fintech businesses.
UK regulator, Financial Conduct Authority (FCA), has created the best financial services infrastructure and set up an appropriate tax system for fintech businesses. This has seen fintech businesses take up a big share of the UK economy. The sector contributes £6.6 billion to the economy annually and employs more than 60,000 people across 1,600 companies. With the existing regulatory framework and other new plans, the UK is in a better position to become a global leader in crypto-assets.
Maksym Lenets, co-founder of REPU, says, “In today’s financial world, the UK is a major global financial hub. Therefore, the country may strive to maintain its precedence as a major player in the crypto-asset world in the new era of blockchain technology. In my opinion, a number of countries/governments have already understood the future opportunity of crypto-assets, even though they might not have announced that yet.We should therefore expect an interesting rivalry for global crypto-asset primacy among governments in the near future.”
One of the actions in the UK Fintech Sector Strategy is establishment of a crypto-assets taskforce to explore the potential benefits and risks of crypto-assets and blockchain technology. Many investors remain reluctant to jump into the crypto world because they do not understand the opportunities and benefits of crypto investments, as well as the potential risks associated with such investments. The findings and recommendations of the taskforce are expected to resolve this challenge.
“I think that over the last few months, UK has decided to carve a niche for itself and prevent talent from straight up leaving or utilizing resources from other countries. It’s a bold move and we’ve already seen economies like Estonia prepare themselves for the crypto revolution. We would hardly be surprised if other countries follow suit,” says Varun Mayya, CEO of Avalon Labs.
The taskforce will comprise representatives of of FCA, Bank of England as well as the HM Treasury.
Several countries are fighting for the crown of the global crypto-assets leader. The U.S. is among such countries having made lots of developments around cryptocurrency regulation. Other global financial hubs, such as Switzerland, Sweden, Singapore, Canada, Japan, Hong Kong, China, Australia and other EU nations are likely to implement a similar approach with the aim of taking a share of the global crypto market.
During the recently concluded G20 Finance Summit, most economic leaders in attendance supported crypto-assets. Representatives of France, Spain and Argentina, already expressed their countries’ confidence and interest in the cryptocurrency industry. As such, the UK should expect stiff competition from other countries even as it strengthens its fintech sector and make the most of crypto opportunities.
“UK seems to dangle the carrot and US is already using the stick, but the end effect is the same, a regulated crypto asset framework. Let us see who gets there first. Nonetheless, this move by UK, already a capital markets powerhouse, will definitely force other countries, especially those in the EU, to consider adoption of crypto tokens. Some countries may take the wait and see approach and let UK the lead. Other countries may want to carve out a ‘crypto’ space for themselves. As it stands, a few EU countries are already adopting crypto tokens, with France being the latest to enter the foray. This move by UK will definitely nudge, prompt or force other countries to incorporate crypto tokens and DLT technology into their financial systems and economy at large,” notes Sir Dr. Jeffrey Lin, CEO of GCOX.
We expect to see all kinds of developments and innovations in crypto-assets in the near future as each country strives to get their hands on the crown. Currently, the UK and U.S. are in the forefront but only time will tell whether they remain there.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.