by David Drake
Cryptocurrency and its underlying technology, blockchain, has become irresistible. The technology is rapidly changing the way businesses transact and has been credited with improving transaction efficiency significantly.
Last month, global economic leaders objectively acknowledged the great ability and potential benefits of integrating cryptocurrency and blockchain in business models during the G20 Summit held in Buenos Aires, Argentina. This acknowledgement may have informed the decision by the UK government to launch its Fintech Sector Strategy just days after the summit.
Upscaling the Crypto Industry
One key aspect of the newly launched strategy is the establishment of a crypto-asset taskforce whose mandate is to create policies and a regulatory framework for enhanced adoption of blockchain technology.
Further, the taskforce will explore benefits of blockchain technology as well as the risks related to crypto-assets including the use of cryptocurrencies to fund illegal activities like terrorism and crypto scam projects. It will come up with recommendations on how to prevent these risks as a way of eliminating “bad players” from the cryptocurrency industry.
When this is done, it is expected that the industry attract more investors, resulting in the sector’s significant growth. Representatives of HM Treasury, Financial Conduct Authority and the Bank of England will sit in the taskforce.
Players in the crypto-industry have lauded the move by the UK government. According to Benny Phang, Chief Strategic Officer of Fanfare Global Pte Ltd, it is a strong indication that the government is ready to embrace blockchain technology.
He says, “This is a strong show of support for blockchain and related crypto assets. It is also prove that blockchain technology and cryptocurrency have their strengths and merits, despite challenges in finding middle ground within the established financial system and regulatory framework. This is especially timely, especially for FANFARE, which is going for its Initial Coin Offering in the next few months.”
The role that cryptocurrencies and blockchain play in the world economy cannot be overlooked. In February, the European Commission launched the EU Blockchain Observatory and Forum aimed at highlighting key blockchain technology developments and boost adoption of blockchain technology in the region.
Currently, a blockchain revolution is underway in Europe. This revolution is expected to quickly spread to other countries according to Varun Mayya, CEO of Avalon Labs.
He says, “I think that over the last few months, the UK has decided it wants to carve a niche for itself and prevent talent from straight up leaving or utilizing resources from other countries. It’s a bold move, we’ve already seen economies like Estonia prepare themselves for the crypto revolution and we would hardly be surprised if other countries follow suit.”
The taskforce proposed by the UK government in its Fintech Strategy is expected to explore implications of cryptocurrencies and blockchain technology on financial stability, tax evasion and revenue collection opportunities.
As such, the UK government wants to position itself as a global leader in the cryptocurrency and blockchain sector to ensure the sector spurs fintech innovation and economic growth. In this digital finance era, there are high chances that other rising and established fintech hubs such as Singapore, Zurich, New York City, Geneva, Toronto, Stockholm and San Francisco, will come up with similar strategies.
After the G20 Financial Summit, Brune Le Marie, the French Finance Minister and Roman Escolano Olivares, the Spanish Economy Minister were already bullish on crypto-assets. Federico Sturzenegger, Argentina’s Central Bank chief was also optimistic about crypto-assets.
Dr. Navjit Dhaliwal, CEO of Iagon, says, “With United Kingdom’s decision to launch a FinTech Sector Strategy focusing on the establishment of a crypto-assets task force, they are undoubtedly looking to place themselves ahead of the curve when it comes to underlying blockchain technology that is poised to revolutionize the way we handle finances around the globe. It is my opinion that other countries will develop similar strategic planning methods in order to reinforce their overall position in the global financial sector. This will allow them to improve their country’s own economy as well as the evolving efficiency of their financial systems.”
Other plans in the Fintech Sector Strategy include the launch of a “robo-regulation” pilot schemes to help new fintech companies comply with industry regulations and creation of industry standards to enable fintech companies partner with existing banks easily.
The appointment of new regional fintech envoys, launch a “Connect with Work Programme” to help fintech companies access UK’s diverse workforce, and support for small, new fintech companies to provide complex financial services are the other components of the fintech strategy.
The UK fintech sector employs more than 60,000 people and contributes over £6.6 billion to the UK economy annually. The new strategy is expected to boost growth of the sector and UK economy as a whole.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.