With the country’s upcoming “Brexit” from the European Union, the United Kingdom seems to be focusing on damage control. The last thing it wants is for UK-based companies to pull their own Brexit, leaving British soil for the EU continent.
In line with the goal of becoming a global fintech hub post-Brexit, Bank of England Governor Mark Carney said the fintech sector doesn’t need an increase in regulation. This move, or lack thereof, is meant to avoid stifling innovation. With Brexit looming, the last thing UK politicians and regulators want to do is to drive away businesses.
The uncertainty that comes with Brexit has already caused some enterprises to consider moving out of the UK for the time being, until Brexit’s impact is better understood. London-based fintech firm Transferwise is already planning to shift its head office to the EU mainland.
The British government aims to be supportive of innovative technologies, and Carney’s statement regarding no need for increased regulation is clearly an attempt to send that message. While speaking at a government-sponsored conference in London, which was held to encourage more fintech investment, Carney said:
"In their current form, these innovations are simply a new front end to the banking system where fintech providers take a slice of customer revenue and loyalty but none of the associated risks. They have generally avoided undertaking traditional banking activities. So for now, absent a substantive change in business models or scale of activities, the Financial Policy Committee is unlikely to want to bring these firms into the regulatory perimeter."
Most fintech innovations are about bringing efficiencies to current systems, not entirely replacing them. The most obvious example is how blockchain technology is being used to streamline back office procedures in several industries across the world.
The UK isn’t just talking, it’s putting its money where its mouth is—the Engineering and Physical Sciences Research Council, a British research agency tasked with distributing government grants, recently announced £3.6M (about $4.5M) in government grants will go to seven blockchain projects. The seven projects are each focused on utilizing the benefits of blockchain-based distributed ledger technology (DLT) in healthcare, energy, banking, and even policy-making.
One of those projects, “Blockchain technology for Algorithmic Regulation And Compliance (BARAC),” received a £617,000 grant (about $773,000). The BARAC project will look into using DLT to disrupt current regulation and compliance models. The project hopes to open “the way for more effective regulation in the services industry.” So the British government can simply give money to the enterprises already working on blockchain technology regulations, saving themselves the effort of creating their own from scratch.
As long as the UK continues to foster fintech projects, it could position itself to become a global fintech hub post-Brexit. Most of the world’s regulators appear to be taking similar stances, allowing the fintech and blockchain technology sectors to self-regulate, rather than risk hindering technological breakthroughs.