Through a combination of decreasing dependance on cash and a rise in digital currencies, stablecoins are becoming an increasingly viable alternative for future growth.
For this week’s Innovation in Payments interview, we spoke to Chris Ford, the Head of Government Affairs at R3, as he emphasised that ‘the government has increasingly recognised the role that blockchain can play in driving growth in our financial sector’.
Payment Expert: How important do you believe crypto regulation in the UK is to strengthening trust within the sector?
Chris Ford: Regulatory and legal certainty provide the core foundations for any emerging technology if it is to be applied successfully. By embracing regulation, it will incentivise more institutional organisations to trust and invest in the space, and therefore enable further growth – which highlights the UK’s efforts amid rising international competition.
The UK’s position as global leader in financial services means that limiting the benefits of DLT to only disruptive newcomers will see the country’s influence heading in the wrong direction. The biggest brake on innovation for major financial institutions post 2008 is uncertainty. By removing that uncertainty through regulation, the Government will unlock the unmatched talent and resources that have been the driving force behind the economy for at least the last two decades.
It’s therefore great to see the government recognise the role to which the distributed ledger technology (DLT) that underpins digital assets and crypto plays in this growth journey. Sensible, proportionate regulation can provide clear guidelines on how DLT should be applied, who may use it and for what purpose.
PE: What do you believe needs to be the focus of the regulatory framework for the UK’s crypto space?
CF: The UK’s regulatory framework should move beyond the accepted wisdom that innovation must be balanced against consumer protection; to do so will only limit the effectiveness of both critical concerns. Instead, there needs to be a realisation that the technology, if employed carefully and within the guidance of regulation can and should enhance both objectives simultaneously.
Many might believe that regulation hinders innovation, when it is actually an enabler for a country like the UK. What the market needs most is greater transparency and risk management solutions to safely boost innovation without putting investors at risk.
PE: What do the impending regulations mean for the potential of CBDCs and stablecoins in the UK?
CF: Regulation can play a central role in realising the benefits of CBDCs and stablecoins by providing clear guidelines on how this technology is applied. With stronger transparency and integrated frameworks within the current financial framework, the UK can start harnessing the power of blockchain-based instruments and other fintech innovations to shape the future of financial liquidity.
Stablecoins in particular have drawn the attention of regulators, but co-ordination between authorities, both domestically and internationally should help to foster effective communication and transparency. Support is essential when fulfilling their respective mandates to ensure comprehensive regulation and supervision across borders and sectors. This can boost cross-border payment processes, and therefore strengthen the UK’s trade industry for an even stronger economy.
PE: Will crypto regulation impact the UK’s status when it comes to the competitive nature of crypto space?
CF: The government has increasingly recognised the role that blockchain can play in driving growth in our financial sector. By embracing crypto and digital asset regulations, alongside critical endorsement of distributed ledger technologies on the market that welcome these forms of regulation, the UK can start moving towards a more open, connected and trusted financial market. This will also unlock a new and improved regulated web3, keeping the UK ahead of the competition.
Competition from international governments is more intense than ever, but the steps being taken to introduce regulatory guidelines will also position the UK as a top destination for technology companies. By attracting a wide pool of talent, the Chancellor will also be supported in his goal of becoming the next ‘Silicon Valley’.
Looking ahead to the SBC Summit Barcelona, the Payment Innovation series places a closer analysis on some of the industry’s key technologies and developments.