LONDON, UK — While many other global nations and fintech centers are facing distributed ledger technology and blockchain activity with apparent reluctance, it seems that the UK has decided to embrace emergent technologies.
In the excitement of Innovate Finance’s IFGS 2022, John Glen MP, Economic Secretary to the Treasury, clarified the UK government’s stance on ‘crypto-technology.’
Addressing the audience of fintech professionals and enthusiasts, Glen stated, “If crypto-technologies are going to be a big part of the future, then we – the UK – want to be in, and in on the ground floor.”
For some time, the UK government has appeared to have been indecisive. Although ‘crypto-technology’ was mentioned within the Kalifa report of February 2021, various private sector actors have chosen to explore its potential until now. The government has focused more on mitigating the possible risks of the technology.
Glen referenced the differing opinions surrounding crypto technologies in his speech, highlighting the concerns of stakeholders on the potential risks and the role digital assets may play in illicit activity.
“We’re aware that crypto assets have proven attractive to criminals and hostile states,” he said. “Which is why we’ve taken proactive steps to prevent their misuse.”
Innovation leading the way
Despite the apparent reluctance to embrace the innovative potential of ‘crypto technologies,’ the Economic secretary announced a change of tune in terms of regulation going forward.
“We see enormous potential in crypto… and we want to give ourselves every chance to take maximum advantage,” he said. “We aren’t going to lower our standards, but we are going to maintain our technologically-neutral approach.”
“Having robust and effective regulation won’t hinder innovation. It’ll actually boost it – by giving people and businesses the confidence they need to think and invest for the long-term.”
He continued, stating that the UK’s approach going forward will have a three-point advantage:
- “A detailed plan”
- “A determination to learn quickly”
- “The government will take a leading role” going forward
The plan involves a dynamic approach led by communication with industry players. Recognizing the speed at which the fintech industry has evolved, Glen spoke of a willingness to act quickly, responding to the regulatory needs of the market in different sectors.
“We should be thinking in terms of regulatory ‘code’… which we refine and rewrite when we need to… shaped by your input and advice… and with the Treasury and regulators, through the Cryptoassets Taskforce, working together to create a dynamic regulatory landscape which works for everyone,” he said.
A distinct focus of the discussion surrounding ‘crypto technologies’ in the past years has been the implementation of stable coins, which was also addressed.
The economic secretary announced that the government would embrace the new currencies, integrate stable coins into the future payments network, and create a regulatory regime that would encourage innovation in the crypto market.
Developments in the legal status of DAOs
In addition, advancements in legislation surrounding the decentralized nature of crypto technologies are also on the agenda. Glen spoke of the Law Commission’s role in creating the UK’s fintech superhub status and announced the undertaking of a new project in the future.
Decentralized Autonomous Organisations (DAOs) are fundamental to blockchain technology, and until now, their legal status has been uncertain throughout the world. Glen stated that the new focus of the Law Commission would be aimed at just that.
“All of this activity is happening against a backdrop of exciting, transformative innovation around the next evolution of the internet: Web3, as many call it,” he said.
“No one knows for sure yet how Web3 is going to look. But there’s every chance that blockchain will be integral to its development… with a more decentralized, open, and user-owned ecosystem.”
“We want this country to be there, leading from the front… seeking out the greatest economic opportunities.”
This marks a massive development in the regulatory landscape regarding DAOs in the UK. Until now, DAOs have not been recognized as legal entities, creating friction in the evolution of decentralized technology.
The progress the announcement signals could put the UK at a significant advantage on the global stage in enabling innovation for fintechs and may have substantial implications for the way other nations perceive DAOs and decentralized technology going forward.
A Royal Mint NFT
As a demonstration of this commitment to decentralized technologies, the Economic Secretary then announced the creation of a government NFT, issued by the Royal Mint.
The first of its kind globally, the government commissioned NFT is set to be released in the summer and marks the commitment of the UK government to the implementation of innovative, market-led innovation.
Glen described the release as “An emblem of the forward-looking approach we are determined to take.”
Although details are currently scarce, there will be more information released soon.
Taking advantage of a smaller regulatory body
The additional advantage points mentioned by the Economic Secretary focus on the dynamism of the singular regulatory body and the unified government of the UK.
Glen referred to the existence of this centralized approach as a distinct advantage compared to the EU and the US affording an ability to adapt quickly to changing conditions. Reporting various initiatives set out by the government and the FCA, they aim to focus on the broader scope of crypto technologies.
The variety of regulatory sandboxes created by the FCA has grown, with the addition of the Financial Market Infrastructure sandbox focused on experimentation of financial services that underpin markets, set to launch next year.
The Cryptoasset Engagement Group was also announced, aimed at creating direct communication between the FCA, the government, and industry leaders, to guide further innovation in the sector.
With dynamic innovation as the lead for the steps ahead, the Economic Secretary’s keynotes speech was a refreshing rallying cry for continued development in the UK fintech sector. With his optimistic outlook, he concluded with a positive approach to the role crypto technologies will play in the UK’s future.
“There’s a genuine opportunity to build on our strengths in fintech, seize the capitalist energy which has already made UK financial services what it is… and use it to unleash the potential of crypto-technologies,” he said
“We think that by making this country a hospitable place for crypto, we can attract investment… generate swathes of new jobs… and create a wave of ground-breaking new products and services.”
“We’re on the cusp of something important. We have the opportunity to shape and lead it. And that is what we’ll do.”