Scaling back on the chaos-inducing radical reforms proposed by his predecessor, Jeremy Hunt’s announcement today was less a “Big Bang 2.0” and more a conservative nudge to the existing financial system.
The Edinburgh Reforms announced today by the Chancellor consisted of over thirty changes to the regulatory landscape to catalyze competition and growth in the sector.
Some of the more significant news for fintech revolved around stablecoins and the prospect of CBDCs. The reforms also aim to push the development of the Financial Services and Markets Bill and publish a plan for regulation regarding digital currencies. A Financial Market Infrastructure Sandbox will also be implemented in the coming year.
Janine Hirt, CEO of Innovate Finance, said, “There are a number of measures which our work on the investment landscape has shown will further strengthen the positive investment environment in the UK. In particular, the independent review of investment research, including the reform of MiFID’ unbundling’ rules, provides the basis to grow a strong analyst capability in the UK that can identify the investment growth opportunities of UK innovators. “
“The fintech ecosystem will also be very interested in the proposals for trialing a new class of wholesale market venue which would operate on an intermittent trading basis.”
“In terms of supporting innovation, we welcome continued commitment to making the UK a leading center for digital assets. It is great to see that the Chancellor’s remit letter to the FCA today includes specific reference to actively embracing the use of new technology in financial services, including crypto technologies and AI.”
In addition, steps toward more regulatory support of sustainable investment were announced. These steps consisted of publishing an updated Green Finance strategy at some point in 2023 and consultation during Q1 of next year about bringing ESG ratings into the regulatory perimeter.
The announcements assured that “The government is ensuring that the financial system plays a major role in the delivery of the UK’s Net Zero target, and is acting to secure the UK as the best place in the world for responsible and sustainable investment.”
Sustainable finance is an area of UK fintech that has started to show significant growth. However, the government’s commitment to Net Zero is debatable, as these statements were made just hours after greenlighting the opening of the first new coal mine in three decades.
Hirt was positive, stating, “These reforms continue to maintain UK competitiveness as a leading global center for innovation in financial services. They should further enhance the UK as a positive investment environment with increasing growth capital for FinTechs, as a leading center for digital assets, and as a regulatory regime that supports innovation.”
Hunt maintains that the reforms “seize on our Brexit freedoms to deliver an agile and home-grown regulatory regime that works in the interest of British people and our businesses.” Others aren’t so convinced.
However, Tulip Siddiq, the shadow city minister, called the proposed reforms a “race to the bottom.”
Her criticism mainly focused on the Chancellor’s announcement of “updating” bank ring-fencing regime. This measure requires banking groups to separate their retail banking services from their investment and international banking activities. Announced consultation on the Senior Managers Regime, which ensures financial institutions adhere to exemplary standards of governance and accountability, also came into the firing line.
“Introducing more risk and potentially more financial instability because you can’t control your backbenchers is this Tory government all over,” said Siddiq, referencing rivalry within the Conservative party.
“Reforms such as Ring Fencing and the Senior Managers Regime were introduced for good reason. The City doesn’t want weak consolation prizes for being sold down the river in the Tories’ Brexit deal, nor more empty promises on deregulation.”