UK Government Commits £10 Million to Digital Currency Research

Luke Parker , 16 Oct 2015 - AdoptionBitcoinUk

The UK Economic Secretary to the Treasury, Harriett Baldwin, recently reiterated that the government will invest £10 Million to research distributed ledger technology, during her speech at the Alan Turing Institute for Data Science yesterday.

-  Harriett Baldwin MP, UK Economic Secretary to the Treasury

 

This initiative started when Chancellor of the Exchequer and First Secretary of State, the Rt Hon George Osborne, made a landmark announcement launching a new trade body for FinTech, called 'Innovate Finance,' in August 2014.

 - George Osborne MP, Chancellor of the Exchequer and First Secretary of State

Osborne recognized the popularity of alternative payment systems, they are quick, cheap, and convenient. While upbeat about how they can be used to benefit the UK economy and British consumers, he also wanted to investigate the risks that accompany any new technology.

Following his announcement the Minister of State, Andrea Leadsom, joined Osborne in spearheading a call for information on digital currencies.

- Andrea Leadsom MP, Minister of State

Her Majesty’s Treasury issued the Call for Information in November 2014. The consultation tapped into public expertise, determining the benefits and risks, so that government could make a decision on whether it needed to intervene in the digital currency market. “Government interventions could take the form of regulation, for example, to curb financial crime risks or to create a more stable market,” the report says.

- HM Treasury report

The UK government received over 120 responses from digital currency users, developers, businesses, banks, academics and government agencies. While there were both positive and negative viewpoints, the government has now committed £10 Million for research.

- HM Treasury report

Baldwin maintained that distributed ledger technology has many potential benefits which need to be explored. For example, it could facilitate the fast, efficient, and secure transfer of digital asset ownership, including shares and bonds, as well as help securely maintain records by means of digital signing and timestamping. “It’s all about making processes simpler and life easier,” added Baldwin.

Digital currency and distributed ledger research is a big part of the government's effort to become a leader in the FinTech sector, which has driven £42 million in investment over the past five years. Baldwin explained that the FinTech sector activities cover a lot of areas, but ultimately, “FinTech is simply a means of providing financial services in a new way.”

After a few examples aimed at convincing the audience, Baldwin reiterated “we are already a major player in financial technology; our ambition is now to be the major player – the leading FinTech centre in the world. It’s a sector where we are already doing well.”

The UK has greatly benefited from the growth in their local FinTech sector, which employs 135,000 people and generated £20 billion in revenue last year. Claiming that the UK is one of the fastest growing regions in the world for FinTech, Baldwin stated that an astounding 42% of all European FinTech investment was in the UK and Ireland, preceded by 136% growth in 2014, reaching £410 million.

- Baldwin

According to a manifesto from Innovate Finance, an independent industry advisory organisation, investment in the UK FinTech sector reached US$623 million in 2014, more than double the previous years US$264 million. By comparison, Silicon Valley remains strongly dominant for now, attracting FinTech investment of more than US$2 billion, exceeding the entire FinTech investment in Europe, US$1.48 billion.

- The Rt. Honourable David Cameron MP, Prime Minister, Minister for the Civil Service and First Lord of the Treasury

The special envoy the Prime Minister was referring to was an American venture capitalist and a partner at Passion Capital, Eileen Burbridge, who was appointed the UK’s FinTech Special Envoy in July.

While Baldwin stated that the government will continue working hard to attract innovative companies, it will also continue an extremely close working relationship with the Financial Conduct Authority (FCA), to ensure a ‘spot-on statutory framework’ for the FinTech sector. The FCA, an independent financial regulatory body, regulates UK financial firms.

This framework specifically relates to The Innovation Hub, the government's joint effort with the FCA, which went live in October 2014. The hub has already helped over 100 innovative businesses, Baldwin claimed.

While the UK government is committed to regulate digital currency exchanges, Baldwin indicated that fostering the right environment is more important if the UK is to become the FinTech center of the world, attracting more companies along the way.

- Osborne

In the US, the Financial Crimes Enforcement Network (FinCEN) has applied rules relating to Anti-Money Laundering (AML) directly to administrators and exchangers of digital currencies, leading to laws like New York’s BitLicense. Meanwhile, the European Commission is considering regulating digital currencies via their own Anti-Money Laundering Directive.

 - Baldwin

There is already a good example from the bitcoin services company Circle, who announced plans to open a London office. Baldwin stated that the company chose the location, to coordinate its European expansion, “because of our positive attitude to FinTech and to digital currencies.”

The UK's Special Envoy, Burbridge, also suggested treading lightly while regulating digital currencies. She recently told Financial News that she did not “see regulator attention or focus as a necessarily bad thing or something to avoid.”

- Eileen Burbidge

Ultimately, the government's goal is to attract more FinTech companies and expand the sector, creating jobs and increasing the country's GDP. Various members of parliament independently agreed that digital currencies have the potential to benefit the people and companies in Great Britain, and that they should ensure that all regulations reflect so.

- Ed Vaizey MP, Minister of State for Culture and the Digital Economy