How close are we to creating Blockchain Britain?
On the 4th of April, Economic Secretary to the Treasury, John Glen MP delivered a keynote speech at the Innovate Finance Global Summit during UK Fintech Week 2022. It highlighted some of the actions the government has undertaken to cultivate the world leading fintech sector present in the UK as well as how they plan to enhance it in future. This was primarily focused on creating a pro innovation environment for the blockchain space. The speech was the first major UK government policy announcement supporting something that Greengage has been suggesting as a real opportunity in this country for some time, namely “Blockchain Britain”. The hope is that the UK becomes a global hub for crypto technology, rivalling the likes of Silicon Valley and shaping the future of the industry.
Firstly, John Glen references the current measures implemented to foster the growth of the fintech sector which also benefit the crypto space. This includes the well-established FCA Regulatory Sandbox in addition to the new “scalebox” that is being piloted. The “scalebox” provides enhanced support for firms that have been recently authorised to operate in the UK, complementing the regulatory sandbox. Additionally, as recommended by the Kalifa Review, a new national fintech body known as the Centre for Finance, Innovation and Technology (CFIT) was formed and met at the end of March, chaired by Ron Kalifa himself. With regards to crypto specifically, he points to how the Money Laundering Regulations have formed a robust regulatory system for crypto-asset firms since January 2020. This as well as a recent consultation on applying the Financial Action Task Force’s Travel Rule to crypto assets are measures to maintain high regulatory standards.
Furthermore, the Economic Secretary outlined how and why the UK can put itself at the forefront of the blockchain world through three factors:
1. The government has a detailed plan cantered on regulation. With the help of the Cryptoassets Taskforce, they aim to create a dynamic regulatory landscape that is responsive to the rapidly evolving crypto space. One of the key steps for this was a consultation on how to regulate stablecoins, with the Treasury’s response being published the same day as the keynote speech. Consequently, they will legislate to enable the use of stablecoin payment services. This will form a part of the leading stablecoin regulatory framework they wish to build. Another regulatory aim is the use of English law as a legal foundation for the use of crypto technology. The Law Commission has already worked on digital assets and smart contracts and is now being tasked with evaluating the legal status of decentralised autonomous organisations (DAOs). As a result, regulatory clarity can be provided for an element at the bleeding edge of blockchain.
2. The UK has a willingness to learn quickly. This is exemplified by the aforementioned FCA regulatory sandbox which has assisted more than 50 firms utilising blockchain technology. Planned for next year, another sandbox called the Financial Market Infrastructure Sandbox will join the FCA’s line-up. Its purpose will be to enable firms to experiment with and innovate their services that support markets. This is especially relevant to crypto technologies as the sandbox is focused on the testing of new technology that could transform financial markets through increased efficiency, transparency, security, and liquidity. In addition, the FCA will be setting up a series of “crypto-sprints” starting next month. These will feature industry experts and help to keep policy thinking up to date with current developments, primarily the technical, legal, and regulatory challenges in the space. The objective is that practical solutions will be developed that the government can implement quickly. In a similar vein, a high-level industry group called the Cryptoasset Engagement Group will be set up to consider the steps that need to be taken moving forward.
3. The government will take a leading role in shaping crypto regulation and will not be as bogged down in bureaucracy as other regions like the EU and US. Thus, they will be able to make swift adjustments and take decisive action. It will also not be something that sits on the backburner as the government considers regulation a priority and plans to lead by example. One application they have already been analysing is the use of distributed ledger technology (DLT) in debt issuance. Another is the use of DLT for customs and international trade. To commemorate this commitment to the space, the chancellor, Rishi Sunak has requested the Royal Mint to create a non-fungible-token (NFT) to be issued this summer.
Overall, the speech was very encouraging. John Glen, the Chancellor and the Treasury have a visionary mindset when it comes to the industry. They recognise that crypto technologies are going to have a significant role in the future and want the UK to benefit from the prosperity they will bring, starting yesterday. Such an approach could lead to a massive leap forward for UK blockchain and enable the country to become the premier crypto hotspot. We are hopeful that this vision is realised and will do our best to support it coming into fruition.
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