Cryptocurrencies are fascinating for so many reasons. In 2015 when I tabled a written Parliamentary Question on blockchain, the technological underpinning of cryptocurrencies such as Bitcoin, I was the first MP to mention the phrase in Parliament.
Bitcoin’s extraordinary price bubble towards the end of last year led to surprisingly broad discussion on the virtues and vices of cryptocurrencies across the general public.
But whilst this extraordinary bubble might have raised the profile of Bitcoin, it left many people at best confused as to the purpose of cryptocurrencies and at worst outright hostile to something perceived to benefit only the nefarious and those involved in criminal activity.
After all, by some metrics this was the largest commodity bubble in history. Even greater than the infamous tulip bubble of 1637, or even the South Sea Bubble of 1720!
Yet we must not allow cryptocurrencies to be tarnished as inherently unstable.
By and large, people aren’t bothered about whether their transactions are anonymised and a decentralised operating system is by its nature unintuitive. What benefits exactly does this present to ordinary consumers?
The answer as to why cryptocurrencies are so important is simple: they are the key to unlocking a truly global system of finance.
Despite a common misunderstanding there is no such thing as the ‘global financial system’. Instead there are hundreds of national financial systems and international money flows which are cobbled together by a complex set of intermediaries, all of which requires fees, wastage and bureaucracy. Cryptocurrencies and blockchain are the key to a truly global financial system in which capital is mobile and trade operate easily outside national boundaries.
That is why this week the FinTech APPG held a meeting on the regulatory standards surrounding cryptocurrencies. We had some brilliant speakers from CryptoUK and excellent contributions from Parliamentarians from a range of views.
Legal recognition of cryptocurrencies and digital assets is a simple and innovative little step that could reinforce the UK’s reputation as being on the cutting edge of Financial Technology for many years. It would be the latest in a series of innovative steps that have collectively led to the UK being a world leader in FinTech, including the world’s first regulatory sandbox in this area and the gold standard in Open Banking protocols.
One of the few areas that we are behind is that several small jurisdictions (Gibraltar, the Swiss canton of Zug and Malta) have legally recognised cryptocurrencies. These aren’t vast and sprawling complex pieces of legislation. Even a simple a set of common definitions for FinTechs to operate under would be reassuring to FinTechs in this area. If the UK adopted a digital currency framework then it would be a real opportunity to be a rule maker, not a rule taker.
It is my ambition to see a self-regulatory code for cryptocurrencies adding to the broad armoury of reasons why FinTechs in this area should see the UK as an ambitious, advanced and exemplary location to base their FinTech firms, which will not only put the UK on the cutting edge, but will bring jobs, tax revenue and greater productivity to the entire nation.