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British and Australian Financial Regulators Sign Blockchain Agreement

Last Updated March 4, 2021 4:47 PM
Andrew Quentson
Last Updated March 4, 2021 4:47 PM

The British Financial Conduct Authority (FCA) and its Australian counterpart, Australian Securities and Investments Commission (ASIC) have signed the first-of-its-kind agreement whereby innovative Fintech companies in Australia and the United Kingdom will have more support from financial regulators as they attempt to enter the others’ market.

Christopher Woolard, director of strategy and competition at the FCA, said:

Innovation in financial services isn’t limited by national borders… We also know that many British firms wish to use the UK as a springboard to launch their businesses or products internationally, making them potentially more sustainable challengers… With ASIC, we will reduce the barriers for authorised firms looking to grow to scale overseas and to assist non-UK innovators interested in entering the market we oversee.

Greg Medcraft, chairman, Australian Securities and Investments Commission, said:

Since ASIC launched its Innovation Hub last year we have seen a surge in requests by fintech startups seeking assistance about how to navigate the regulatory requirements. In particular we have dealt with… blockchain business models. We believe this agreement with the FCA will help break down barriers to entry both here and in the UK.

The support is somewhat extensive, including a dedicated team or contact person for a year who will help the business to understand the regulatory framework and how it applies to them.

The Tech sector, in general, is fast growing in the United Kingdom and is now second only to banking. The Fintech sector in particular, where Bitcoin, Ethereum and Blockchain related start-ups are a sub-category, has doubled, tripled and in some parts even quadrupled in recent years with an estimated revenue of around £6.6bn in UK and A$1.3 a year in Australia.

According to a recent KPMG report, Fintech investment doubled worldwide in 2015 hitting an all-time high of $20 billion, with $7 billion invested in North America. In Asia, Fintech Investment quadrupled to $4.5 billion with funding to VC-backed Fintech companies in China, a growing regional hub, exploding. In Europe, London dominates the Fintech scene outpacing Germany by 398%.

In particular, according to Ian Pollari, Global Co-leader of Fintech at KPMG:

Blockchain is a notable example of an emerging technology that offers enormous potential to the financial services industry.

Investment in Blockchain tech almost doubled in 2015 to half a billion with a notable increase in $50+ million investments and the first Series C deal in the blockchain and bitcoin space to date.

Learning from the experience of Kodak and Blockbuster as well as Encyclopedia, traditional financial institutions have announced a number of initiatives to adapt to new technologies made possible by the internet, such as blockchains, almost instant international transactions, cheap value transfers, and the many other opportunities made possible by smart contracts.

To take advantage of these new opportunities major banks have announced a number of individual projects and hackathons, as well as creating a consortium of almost all major western global banks through a company called R3.

Of particular note is London which was recently crowned the Fintech capital of the world, primarily due to its highly welcoming regulatory environment. In a recent report by the prestigious consultancy firm EY, New York was found to have the most demand for Fintech and Blockchain related services, with California having the most talent. However, New York was ranked last out of seven global hubs, with California ranked second to last, on their regulatory environment.

The United Kingdom, on the other hand, has shown great foresight and has championed Fintech in both rhetoric and by announcing a number of tax-related incentives. It further benefits from the close proximity between the banking and tech sector with Silicon Roundabout, London’s hip tech hub, only walking distance from the City, London’s banking cluster. However, it faces fierce competition, not only from the ever growing richer Shanghai, but also from a little known, naturally formed, tech village cluster in Switzerland.

Featured image from Shutterstock.