Crypto Gives The UK The Freedom To Set The Rules in FinTech After The Brexit Deal
The skeptics of the Brexit deal were majorly concerned about the economic and financial conditions of the country, however, there are major hopes from those who are involved in the UK’s fintech sector. The main reason for that is that, after the leaving of the EU, the UK will be able to set its own regulatory framework on the whole industry and does not have the obligation to follow the EU standards anymore.
It not only gives the hope for the creation of innovations but it could also play an important role in making the UK one of the most advanced hubs for the decentralized economy or DeFi. These remarks come after the UK Financial Conduct Authority launched a consultation on the regulations of crypto assets, with an emphasis on stablecoins. The United Kingdom is also in the process of the government-backed fintech industry, which will provide recommendations on how to effectively foster the country’s fintech industry post Brexit. One of the parts of the agreement is that the Financial Conduct Authority allows the European payment companies to continue trading in the UK, but under temporary permission, which will be updated after a certain time period. However, this initiative still needs to be approved by the EU and its member states.
An important factor in this whole process is that the CEOs of UK crypto and DeFi companies, and we are talking about the influential companies, believe that the deal could work well for the whole industry as it gives them more space and a better fintech environment. They even say that the deals vividly indicate that the UK companies want to carry on their activities without the interference of any kind of tighter regulator, which gives them the opportunity to conduct the processes the way they want, without the European standards. The amount of fintech innovations that are currently registered in the country gives hope for the creation of a whole new era for the country.
To put all those into numbers, the UK fintech sector is worth around 7 billion pounds, and it employs more than 60,000 workforce, which is official government data. According to the statistics, the London fintech industry garnered $3.6 billion in venture capital across 169 agreements between January and September 2020. Another important aspect to take into account is the fact that the crypto market cap passed the historical maximum, $1 trillion, which means that there is a space in the industry for great innovations and start-ups. In this case, while the regulatory framework of the EU is restrictive, industries such as implementing cryptos in the payments system, as well as the companies that are working on the creation of more efficient platforms for crypto transactions and crypto betting in the UK are having the best opportunity right now, to start working on their innovations and get ready to represent their ideas in order to get the license for operating.
While the financial industry in the UK faces significant uncertainty as a result of Brexit, this is not new in the crypto and DeFi arena. Brexit may also provide a chance for the fintech community and politicians to develop more innovative regulations and take the lead in DeFi and digital assets. It also gives the FCA the opportunity to be more agile in its approach to crypto, after the exit from the EU.
The United Kingdom may be freer to innovate and position itself as a global fintech hub as a result of Brexit, however, it will still have to walk a delicate line between accomplishing these goals and keeping access to EU markets.
The prospect of a dual-tack regulatory framework following Brexit exists, giving new entrants from outside Europe and UK start-ups some leniency on the hefty regulatory burden that financial businesses bear. The FCA has been leaning this way in its mandate to foster innovation for years and may now be empowered to act much more aggressively. Using the United Kingdom as a stepping stone before tackling the EU’s more stringent regulations may potentially attract fintech and crypto investment in the United Kingdom.
The FCA already has a reputation as one of the world’s most progressive regulators when it comes to fintech, and its sandbox project, which started in 2016 and is a testing program for early-stage fintech, has been replicated by a number of other nations.
The skepticism also arose from the companies that are operating on the EU market, such as the firms that provide the companies with technology for Open Banking, and the Brexit deal will make the business more difficult to do on the continent. This is why many of the companies are now trying to get authorization from the Bank of Ireland that would allow them to carry on their business activities in the EU countries.
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