Making Britain a global hub for cryptoasset technology and investment
This week the government announced moves that will see stablecoins recognised as a valid form of payment as part of wider plans to make Britain a global hub for cryptoasset technology and investment. This is part of a package of measures to ensure the UK financial services sector remains at the cutting edge of technology, attracting investment and jobs and widening consumer choice.
Our Commercial Law Partner Karl Foster specialises in Fintech, Technology, Media and Telecoms and Financial Services, and he shares his initial thoughts below.
On a day when both Starbucks and the Royal Mint announced plans to develop NFTs, it feels like we are at the cusp of widespread adoption. NFTs, or non-fungible tokens, are best known in relation to digital art such as ‘Bored Ape Yacht Club’ and are cryptographic tokens that cannot be replicated and which act as a certificate of ownership for virtual items. The digital art market has exploded in recent years but the fact that those in wider industry are developing NFTs is exciting for the broader adoption of what has been something of a niche technology to date, and will surely stimulate the utility and legitimise the use of NFTs as a new and developing way to engage with a customer base. Liverpool FC’s recent NFT is a good example. Although criticism has been levied at the announcement, particularly given that storing NFTs on a blockchain is energy-intensive at a time when energy prices are rising. It also remains to be seen whether the Royal Mint NFT is more than a virtue signaller; nevertheless, these are exciting times.
The UK government’s announcement on plans for the UK to become a “global cryptoasset technology hub” further cements the UK’s position as a fintech leader and the timing is apt as the news has landed during UK Fintech week. Of particular interest was the announcement that stablecoins will be brought within regulation to facilitate their adoption as a means for payment. Cryptoassets have been under regulatory scrutiny recently with the requirement for UK based crypto firms to register with the FCA under money laundering regulations and the recent FCA Consultation paper on the marketing and promotion of cryptoassets. This announcement underlines the movement towards the integration of cryptoassets within the mainstream financial services regime with the regulatory oversight that implies. Given that stablecoins are linked to fiat currencies or reserve assets, no doubt the fact that regulators will be better able to manage systemic risk was an important factor behind this announcement; however, in practical terms, it provides greater opportunities to leverage the speed and cost advantages of distributed-ledger infrastructure to help stablecoins realize their potential, as mechanisms for transmitting, storing and settling value. I would expect to see innovation in micropayment and cross border payments as a result and will be interested to see how the regulatory “sandbox” will develop and be utilised. Either way, the statement sends a strong signal that the UK intends to remain at the forefront in the development and implementation of products using blockchain as infrastructure.