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This morning Matt Hancock presented his views in a fireside chat entitled “How the Government Should Be Supporting Crypto”, advocating for the right attitude, regulatory framework, and rulebook.
He was interviewed by David Brear, CEO, and co-founder of 11:FS at Merge 2022.
Matt Hancock was elected to the House of Commons in May 2010 as the Conservative MP for West Suffolk. During 2010, he served as a backbencher on the Standards and Privileges Committee and the Public Accounts Committee.
Mr Hancock entered government in September 2012 and has served in several ministerial roles, including Paymaster General. He also oversaw the expansion of apprenticeships and championed the digital transformation of government.
From July 2016, Mr Hancock served at the Department for Digital, Culture, Media & Sport as Minister of State for Digital. He was responsible for broadband, broadcasting, creative industries, cyber, and tech industries. In 2018 he served as Secretary of State for the same.
Between 2018 and 2021, Mr Hancock served as Secretary of State for Health and Social Care; a position he resigned in mid-2021.
Hancock shared his insights on the role of the crypto industry and policymakers in ensuring the UK economy remains at the forefront of innovation.
“There’s a revolution happening. This is going to change things for the better. The question of government is not how do we allow that to happen but what can we do to make it happen?” he said. “It should all be seen through the framework of how we support this revolution, not how we decide on the dogma and politics; politicians should not be deciding where this is going. We should be facilitating it… I think there is now a serious realization that unless US and UK authorities have put in place a positive liberal regime with space for the building, we’re going to do that.”
It has been made clear by Mr Hancock that if the UK does not support the industry, the government loses out. Therefore, action is needed to improve clarity and create a regime that encourages builders to build. Although equally, he did observe that “the penny has dropped for the current government.”
What can the government do?
In April, the previous government announced moves to recognize stablecoins as a valid payment form. Isle of Man-based fintech company Blackfridge launched poundtoken – the first British-regulated stablecoin fully backed 1:1 by pound sterling (GBP) in July. Mr Hancock says it’s time to go further.
“The critical work to be done is creating a private stablecoin rather than a government doing it themselves. They know they need to transpose the current rulebook and have clarity about what it means in the digital context.”
In terms of regulation, Hancock favored the free market.
“The approach of the regulator [should be] that they don’t have a view unless something goes wrong. And you should not have to go to the regulator to ask permission.”
He talked about this as a change from Neapolitan world views (a codified set of regulations) to classical British ideas, which he perceives as “just getting on with it” and having a permissive regime that encourages innovation.
Equally, this view emphasizes the need to bring stakeholders like those at Fintech Nexus’ Merge 2022 conference into the conversation to write and adapt the existing rulebook.
Particularly in the Financial Conduct Authority (FCA), Mr Hancock emphasizes the need for a laissez-faire approach that allows for failures as a fundamental part of innovation.
“I’m absolutely clear that if there is a failure, there is nothing wrong with that. Failures are a good thing; they signify the market’s vibrancy. There is no problem when there is a failure called a free market; we should applaud it.”
UK’s competitive advantage
Hancock stated that the Web3 revolution is happening, whether or not the UK participates. Therefore the broader question to ask is who will lead this? Will the UK remain competitive, or will another jurisdiction take over?
In Hancock’s opinion, the UK has a competitive advantage because:
- Most financial contracts take place in English Law
- The UK has a competitive regulatory system
- The UK has a history of financial innovation
“We have a history to help us win.”
Indeed according to Legal UK, English law has been a popular choice of governing law for many types of financial transactions.
In 2019, it governed around £250bn ($283bn) of global mergers and acquisitions and 40% of global corporate arbitrations. With the emergence of new economic areas (fintech and green bonds, for example), and the establishment of international commercial courts across Europe, English law has opportunities and risks in terms of its role as a global standard for transactions. It is still yet to be seen if these advantages remain in a post-Brexit environment.
Similarly, Hancock and Brear explored the possibility of the emergence of several centers of innovation. Instead of the UK winning the race of the innovation revolution, will it be multiple countries innovating together in a decentralized system? According to Hancock & Brear, the contenders are the UK, UAE, Switzerland, Singapore, France, and possibly others.
This view is aligned with the World Intellectual Property Organisation (WIPO), which conducts a Global Innovation Ranking. Switzerland, the United States, Sweden, the United Kingdom, and the Netherlands are the world’s most-innovative economies, according to WIPO’s 2022 Global Innovation Index (GII), with China on the threshold of the top 10. Several other emerging economies show consistent growth, including India and Turkey, which both entered the top 40 for the first time.
No doubt Hancock shared some bold views regarding the future of the Web3 economy and what the government should be doing. With a hopeful attitude, he continued discussing what the UK’s next steps might be.
- Stabilizing the macroeconomy
According to the Office of National Statistics (ONS), Gross domestic product (GDP) is estimated to have fallen by 0.3% in August 2022, after a growth of 0.1% in July 2022, adding to growing predictions of a recession.
2. Put in a clear direction to build the ecosystem
A crucial part of this process is to ensure the UK maintains its position as a market for innovation by adopting a liberal attitude towards the economy and builders. Additionally, simplifying the rules so that at least 80% of the market wants to be in the UK.
The result being everyone at Fintech Nexus Merge “can build build build.”