by Sean Kiernan, CEO Greengage Global Holding Ltd
In April 2022, the UK Government announced its intention to make Britain a global crypto asset technology hub. It set out a range of actions to support this goal, building on its wider financial technology strategy, and the outcome of the 2021 Kalifa Review.
Just a few months on, how times have changed. We have a new Prime Minister, Elizabeth Truss, with a fresh Cabinet. New Secretary of State for the Department for Digital, Culture, Media & Sport Michelle Donelan is now covering all matters digital with Andrew Griffith, new Financial Secretary to the Treasury, assuming the City Minister portfolio held most recently by Richard Fuller.
For close watchers of the industry, the big question is whether the Government’s stated desire to make the UK the global crypto asset technology hub remains a priority or even a realistic ambition. Or will other societal changes such as the arrival of a new King and more pressing Government challenges – including inflation, war in Ukraine and fuel crises – render it more of a pipedream?
Is there sufficient enthusiasm and support from the new Prime Minister and her Cabinet to ensure that the UK is at the forefront of change, taking us out of the Crypto Winter to a digital asset new dawn? And will our new PM remain true to her 2018 Twitter endorsement to welcome cryptocurrencies “in a way that doesn’t constrain their potential”?
The new administration’s priority is, of course, economic growth. New Chancellor, Kwasi Kwarteng, has already announced sweeping financial reforms to unleash Big Bang 2, and the new and elevated role of Financial Secretary to the Treasury suggests that Government recognises the importance of the financial sector’s contribution to growth and global competitiveness. While it is not yet clear where digital assets fit in to this Big Bang strategy, procrastination about the value and role of digital finance will inevitably impede its success.
Early signs are encouraging. Just a week ago, the Financial Services and Markets Bill had its second reading. As its sponsor, former City Minister Richard Fuller noted: “Government will move at pace to implement a more agile and more internationally competitive set of rules that will harness the potential of UK financial services to stimulate growth across the United Kingdom.”
Former Chancellor Rishi Sunak thanked John Glen for his efforts as the longest-serving City Minister to deliver “the most radical and significant piece of financial services legislation that this House has seen in years, if not decades”.
Other contributors from all parties supported the proposed legislation broadly. Caveats and cautions concerned throwing out European legislation with the Brexit bathwater, sustainability, fraud and consumer protections, and Parliament’s power to step in, as necessary, as the regulator of last resort.
A proposed amendment to the Bill would allow the Treasury to direct regulators to make changes, a significant shift in power but for many, a welcome approach. At the same time, and acknowledging the “bewildering pace of change in financial markets”, contributors also cautioned against legislating for things “that have not yet been invented”.
Of particular interest, the Bill seeks to bring stablecoins within the purview of UK regulators and to facilitate the development of experimental digital sandboxes. In the absence of regulation and consumer protections that apply to traditional finance, the FCA has issued strong cautions to consumers. Today, it is estimated that some 10% of UK adults (nearly seven million) have dabbled in cryptoassets and, as awareness increases, attitudes towards them change, with increasing numbers seeing them as an alternative to more mainstream investments.
Since 2018, the multi-party Treasury, FCA and Bank of England Cryptoasset Taskforce, with contributions from interested parties has focused on scoping appropriate regulation for new, decentralised digital assets and technologies. At the same time, it seeks to balance the UK’s international reputation as a safe and transparent place for financial services business with the need to protect consumers, to guard against threats to financial stability that might emerge in the future and, importantly, to allow innovators in the financial sector “that play by the rules” to thrive.
Industry participants including Greengage continue to be active contributors to All-Party Parliamentary Groups focused on digital transformation. Groups like the UK Cryptoasset Business Council are also performing a critical role as a collective voice of the sector, ensuring that the opportunities presented by the UK crypto economy are visible at the coalface of government.
Our own review of parliamentary mentions of blockchain highlighted some of its key, cross-party proponents, including John Glen, Martin Docherty-Hughes, Lisa Cameron, and Chi Onwurah, as well as the Lords Holmes, Wei, Agnew and St John . The increasing number and frequency of mentions in both Houses suggests increasing acceptance of this burgeoning industry – continued constructive engagement is paramount.
It is encouraging that Government has affirmed its intent to make the UK “the country of choice for those looking to create, innovate and build in the crypto space”. As Richard Fuller observed, we can either be a spectator or grasp the nettle and leverage the potentially enormous opportunities presented by these new technologies in terms of investment, job creation and revenue-generation for UK plc.
The challenge is finding the right balance between regulation, particularly around consumer protections, and the opportunity presented by these new assets and technologies to contribute to the UK’s growth and global competitiveness.