The Role of FinTech in the 2018 Economy
During March 2018, several events signified a change in how the UK’s financial services industry will interact with and accept emerging financial technology, or “FinTech”. The financial services sector is beginning to open up to the once suspicious and volatile cryptocurrency market, as well as the ways in which business-to-business transactions will be carried out in the future.
In the middle of the month, Barclays Bank announced that it had concluded negotiations which would allow Coinbase, a leading cryptocurrency exchange service with almost 12 million users, to open an account with the bank. Crucially, the deal will allow Coinbase customers access to the Faster Payment system, creating a far simpler method by which cryptocurrency owners will be able to make deposits into and withdrawals from their accounts. Customers were previously forced to route all of their transactions through an Estonian bank with the process taking days and including the step of transferring all funds into Euros. The ability to make use of Faster Payments will not only increase the speed of transactions but ensure that customers in the UK are afforded some certainty in retaining Sterling rates. Coinbase also announced that it has been granted an e-money licence by the Financial Conduct Authority, allowing it to issue cryptocurrencies in the UK and boosting its potential in partnering with UK business.
At the end of March, Philip Hammond announced that the government will launch a new “FinTech Sector Strategy”. The strategy will standardise industry guidelines, which will also allow crypto-focused firms to partner with banks far more easily. A “crypto-assets task force”, bridging across HM Treasury, the Bank of England and the FCA, will also examine the underlying technology in an effort to identify potential risks to the sector and manage against these to generate market certainty. Most significantly, the UK is to enter into a “FinTech Bridge” with Australia. The partnership is designed to ease the process for UK firms using crypto-assets who wish to expand internationally. Of course, this announcement must be considered alongside the announcement in February that the Treasury Select Committee would be launching an inquiry into digital currencies and their potential risks to the UK economy, both for businesses and consumers.
Internationally, governments are taking significantly different approaches. China has been notably negative to the possibilities of BitCoin, bringing in severe domestic regulations culminating in a ban on cryptocurrency exchanges; a major factor in the drop in BitCoin prices at the end of 2017. The UK approach is certainly more positive but attempting to conflate the highly volatile currency into a sector which is generally risk-averse will be a difficult task for the government, financial sector, and technology proponents alike. Regardless, it appears that the UK is taking its first steps in the journey to integrate new technologies which will result in greater efficiency and security into its commercial landscape.
At Morisons we are dedicated to exploring the best vehicles for your business and discussing how companies investing in and operating with emerging technologies can expand. If you would like to discuss ways in which Morisons could help your business, please contact our Technology, Innovation and Life Sciences team on 0141 332 5666 or 0131 226 6541.< Back