UK Financial Regulator’s New Initiative Encourages Bitcoin Innovation

Nermin Hajdarbegovic
Jun 3, 2014 at 11:23 UTC
Updated Jun 4, 2014 at 09:12 UTC

The Financial Conduct Authority (FCA) has announced a new initiative that could help bitcoin businesses in the UK. The move could mark a shift in approach for the regulator, which has steered clear of digital currency until now.

The FCA’s hands-off approach has not had a negative effect on the UK’s bitcoin companies, however. The nation remains one of the most attractive jurisdictions for bitcoin businesses, with the continent’s biggest financial hub at its heart.

Project Innovate is launched

The new fast-track initiative, Project Innovate, was announced by FCA Chief Executive Martin Wheatley in London last week.

The authority now says it wants to ensure “positive developments” like bitcoin are supported by the nation’s regulatory environment.

Project Innovate is designed to promote innovation in the financial sector and the FCA wants to create room for “the brightest and most innovative” companies to enter the space.

Wheatley reflected on a number of questions relevant to digital currency businesses, namely innovation and novel business models. He also recognised that some developments managed to transform finance in “improbable timescales”. These developments include crowdfunding, digital currencies and peer-to-peer technologies.

COINsult‘s regulation, compliance and risk consultant Sian Jones believes the FCA’s initiative could provide digital currency businesses with much-needed regulatory certainty and crystallise the UK’s status as the go-to digital currency jurisdiction.

However, Jones points out that it remains to be seen if and when the FCA plans to announce its official position on digital currencies, or whether or not Project Innovate results in “light touch” regulation or no regulation at all.

“Then, if Britain’s banks would only open their doors to Bitcoin businesses or a Fidor-like challenger bank were to emerge in the UK, that really would be something.”

UKDCA and UK’s stance on bitcoin regulation

Jones is also a founding member of the UK Digital Currency Association (UKDCA), which launched last March.

The Association has consulted Her Majesty’s Revenue and Customs (HMRC) on bitcoin-related issues and it has hosted a number of events in an effort to raise awareness and discuss regulatory issues. The UKDCA board includes Bullion Bitcoin owner Adam Cleary, Elliptic co-founder Tom Robinson and BankToTheFuture.com co-founder Simon Dixon.

The UK’s position on digital currencies is relatively ambiguous, but this has not stopped multiple bitcoin operators from incorporating in the UK.

Technology lawyer Eitan Jankelewitz has explained how UK regulation applies to digital currencies and what makes the nation so attractive for bitcoin businesses. However, he also concluded that the lack of regulation has caused more problems than opportunities for bitcoin businesses.

In late October the British Government launched a programme to support so-called Challenger Businesses (ie businesses based on new technologies) with vigorous models and innovative products.

Following meetings with members of the FinTech community, the Challenger Business team published a set of conclusions, identifying the same disruptive and innovative trends mentioned by FCA’s Martin Wheatley.

These included peer-to-peer loans, crowdfunding, digital currencies, as well as new payment schemes and anti-money laundering (AML) regulations.

London image via Shutterstock

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