The latest speech of the British Finance Minister on cryptocurrencies

Summary

This article is a summary of the keynote speech delivered by John Glen, Minister of Economic Affairs, UK, at the Global Summit of Innovative Finance during the FinTech Week 2022 on April 4, 2022. The original version was published on Gov.UK, and the Chinese version was translated by Guosheng Blockchain Research Institute. tidy.

The core point of this speech is that the British government attaches great importance to the crypto currency market and related technologies, and will fully support the crypto asset market with an open attitude, policy and regulatory levels, so that the United Kingdom will stand in the world’s leading position in the cryptocurrency field in the future. .

According to John Glen, Minister of Economics at the UK Treasury, the UK’s world position in the field of fintech is second only to the United States. But to consolidate this position and make further breakthroughs, the biggest motivation will come from participating in the cryptocurrency market. It currently appears to be a three-step process:

    1. Make a plan, starting from adjusting the regulation of the crypto market, incorporating stablecoins into the official payment system, providing sufficient legislative guarantees, and adjusting the tax system;

    2. Establish a mechanism for rapid learning and rapid action to adapt to the dynamic changes in the encryption market

    3. The government will play a leading role as a whole

Overall, this speech mainly conveys that the UK is determined to actively participate in the cryptocurrency market and has already taken concrete actions to occupy the leading position in the industry in the future.

Translation: Keynote speech by John Glen, Minister of Economic Affairs, UK

one

Fintech is such a rapidly changing and exciting industry. Of course, this is thanks to the dedicated efforts and professional thinking of everyone here. When Prime Minister Rishi Sunak thinks and looks forward to the future, thinks about how to support the economic recovery, especially when driving the UK on the road to becoming the world’s best financial center, fintech is also the most important. a plate.

Economic development is inseparable from the promotion of various financial services, which is inseparable from the endogenous driving force generated by the continuous growth of financial technology. The compound growth rate of investment in fintech in the UK in 2021 will reach 200%. We are Europe’s leading fintech hub and second only to the US in the world. Half of Europe’s fintech unicorns are based in the UK, which attracted more investment last year than France, Germany, Sweden and the Netherlands combined.

Of course this is important. As the Prime Minister said when he communicated with you last year, he believes that what makes the UK a world-class financial center is technology, and technology helps everything do better. So there is no doubt that the Prime Minister and I value you very much and will do everything in our power to support you further. That’s why we entrusted Ron Khalifa to think about the building of the UK fintech sector from an independent perspective, and to implement every single one of his recommendations with the utmost care.

The FCA (Financial Conduct Authority) has expanded and enhanced its world-leading regulatory sandbox. It can test its innovative financial products, services, business models and marketing methods without immediately being subject to regulatory rules when related activities run into problems), and named Scalebox. At the same time, a few weeks ago, the British non-profit organization “Innovative Finance” just announced that they have established an international fintech organization, which will be jointly discussed with the British Department for International Trade.

A very key piece of Kalifa’s proposition is to establish a brand-new, national-level fintech entity: CFIT (UK Centre for Financial Innovation and Technology), whose arrival will become a powerful boost to UK fintech in the future. Khalifa himself will serve as CFIT’s committee chair, and in fact just last week convened the full committee for its first meeting since its inception.

Another recent milestone in UK fintech should belong to Open Banking. Consumers, enabling consumers to access more diverse financial services. At the same time, the relationship between banks and fintech companies has shifted from competition to cooperation), and open banking enables technology to facilitate innovation and empower consumers. We will also set up a new supervision and management committee to adapt to the development of open banking in the future.

two

In the UK, fintech is booming. However, there is actually more to look forward to.

Whether it is for the Prime Minister, for the Ministry of Finance, or for me personally, there is a special message that I would like to share with you:

Throughout the long history of business society, there has never been an innovation as hyped and misunderstood as the current blockchain and distributed ledger technology. For simplicity, I’ll use the more widely known term “cryptocurrency” to refer to it later.

But I want to mention more about the technology that makes cryptocurrencies work on them. I’m pretty sure these technologies will have a profound impact in a variety of ways. These are not things we often experience. This is both a challenge and an opportunity. Now I will tell you what the UK will answer to this:

The main premise of all is that we want the UK to become a world financial hub, a dream place to start and expand cryptocurrency companies. If there was only one conclusion today, it would be this: the UK is open and welcoming to cryptocurrency businesses.

We are standing on the eve of the explosion of cryptocurrency technology, but there is no broad consensus on what even cryptocurrency can bring us. Like whether we are heading for a steady state, when will this happen, or whether cryptocurrencies are a beneficial thing at all. These issues have generated a lot of debate among cryptocurrency pros and cons, as well as a variety of opinions.

Some people are concerned about cryptocurrencies, some think it will harm consumers, some think it is a platform for illegal sex activities outside government supervision, and some worry that it will increase carbon emissions. Others say it’s an unprecedented good thing: they argue that cryptocurrencies will revolutionize the world’s finances by making financial transactions more transparent, efficient, and democratic, and then move money from the hands of nations to the hands of the people.

three

These discussions prompted us to think about how to answer, and here are our answers:

If cryptocurrency technology is going to play an important role in the future, then we in the UK must be the first to participate, and the second to be in a favorable position.

In fact, if we start to identify this path now, and then start doing something, then we can come out on top.

Many people’s concerns sound reasonable, which is why we have said that in order to protect consumers, we have introduced relevant cryptocurrency asset legislation in the financial promotion regulations, so that investors can fully understand that they will be affected by this after participating. risk taking; and as the Bank of England’s Financial Policy Committee recently released, we note that as cryptocurrency technology becomes increasingly linked to the core financial system, we need to ensure that regulators have the right tools to manage risk; and We have also seen some criminal groups or hostile elements targeting crypto assets, and we have taken active steps to avoid these abuses.

From January 2020, crypto-asset companies in the UK are subject to the UK Money Laundering Regulations 2007, and we have recently been discussing implementing FAFT (Financial Action Task Force on Money Laundering). Rule is a regulation introduced in the United Kingdom in 2021 to regulate online and cryptocurrency transactions and prevent money laundering) to regulate the transfer of encrypted assets.

We have robust systems to meet these higher standards. With regard to Russia in particular, OFSI (Office of Financial Sanctions Implementation) issued a joint statement with the FCA and the Bank of England, reiterating and directing crypto-asset companies to take responsibility for ensuring that sanctions against Russia are enforced.

The UK has played an important role in the OECD (OECD) discussions on the tax reporting framework for crypto assets. This will increase tax transparency and consumer confidence, and provide a level playing field for international tax reporting.

In terms of carbon emissions, the UK is also a leading practitioner of green finance internationally. Of course we will also pay close attention to the energy usage associated with cryptography. These are our answers to this question.

But at the same time, we should also see the huge space to be tapped in the field of encryption. We want to seize these opportunities and make the most of them. Without lowering the bar, we will remain neutral: because by strengthening people’s and businesses’ confidence in long-term investment. Strong and effective regulation does not hinder innovation, but actually promotes it.

Four

So how will we do this? There are three key steps:

  • make a detailed plan

Dynamic regulation . Our view is that cryptocurrencies will gradually impact various industries including financial services. The impact will be dynamic, which means that the way we regulate crypto needs to be dynamic as well, just like when regulating other financial activities and products, static and rigid will not do. Instead, the process may be more like managing computer code, as code often needs to be upgraded and rewritten for greater adaptability and customization. This is where we need to work with the Treasury and regulators through the Crypto Assets Working Group to create a dynamic regulatory environment that works for everyone.

I’ve also recently been concerned about the FCA’s introduction of a “temporary permissions regime” which is a new world for the new regulator. We need to work together, learn from each other, and maintain these high standards while being agile to work at the pace of innovation that today’s world demands.

stablecoins . Last year, we discussed how to regulate so-called “stablecoins”, and it is true that there are some companies in the market who are keen to develop such coins for rich payment scenarios. Today since we’re here to post our answer to the future. So now I can firmly say that we will pass legislation in the future to include certain stablecoins in our payment framework, creating conditions for cryptocurrency issuers and corresponding service providers to operate and grow in the UK. For consumers, this will enable them to use stablecoins for payments with confidence. For the government, passing this legislation also demonstrates its determination to provide world-leading regulatory regimes for stablecoins.

We are committed to stablecoins because we want to focus first on areas of the crypto space that have immediate potential and interest. But we are now trying to expand the coverage area. Markets are turning upside down every day, and we can consider running a wider range of crypto activities, including the trading of tokens such as Bitcoin. We will also provide a world-leading mechanism for other cryptocurrencies and transactions, which brings not only security and sustainable development, but also rapid response and innovation.

legal environment . The legal provisions, legal services and courts that have been accumulated in the UK from the long history to the present are already huge spiritual wealth, and they will play an even more important role in the digitalization of everything in the future. I would like to thank the UK Judicial Task Force, chaired by Geoffrey Vos, for their excellent contribution in this particular direction. I would also like to thank the Legal Committee for all their work on digital assets and smart contracts, and am pleased to announce that they are working on a new project: the legal status of Decentralized Autonomous Organizations.

These projects help keep us at the forefront of legal innovation, just as we did for LLCs in the 19th century and the legal framework for derivatives and securitization markets in the 1990s. UK law can and should provide the legal basis for the use of these borderless technologies.

Of course, all of the above is happening under the next exciting change around the internet: Web3, as many have said. Although no one is entirely sure what Web3 should look like. But there is a good chance that blockchain will become an integral part of its development, allowing it to have a more decentralized, open and user-owned ecosystem. At this point, we want the UK to be at the forefront, looking for the biggest opportunities out there.

The government is already working with digital regulators to understand which problem solutions will bring the greatest benefit to society. We will also move forward with you to make changes to their tax system , although in general, we do not believe that tax laws need to be changed significantly in order to adapt to cryptocurrencies. We also have to study and solve specific problems, such as DeFi loans and staking. We will revise the investment manager exemption policy to remove barriers to UK fund managers investing in crypto assets.

Overall, we want to position the UK as a supportive innovation region that remains attractive to both inward investment and growth stage companies.

  • The second thing is that we have made up our minds to learn fast.

The UK has already won several battles when it comes to experimenting with the FCA’s regulatory sandbox, which has supported more than 50 companies using blockchain.

The FCA announced today that they will be organizing the first event in their “Crypto Sprint” series next month, featuring dozens of industry experts . The series of events will continue to inform the FCA’s decision-making, and the participating experts will be responsible for addressing some of the legal, technical and regulatory challenges facing the industry, and then propose practical solutions, and the government will then take immediate action.

We will also launch a financial market infrastructure sandbox , which the Prime Minister announced last year, and we are making good progress on that. The sandbox, run by the Bank of England and the FCA, will allow for experimentation and innovation by companies serving the market. This will allow them to test new technologies that can transform financial markets by increasing efficiency, improving liquidity, enhancing transparency and improving security. We plan to start this work next year, and if necessary, we will update the relevant legislation accordingly.

With the same in mind, we will also establish a high-level industry group: the Crypto Asset Engagement Group to guide our direction. This industry group will be a direct and open channel of communication. Chaired by ministerial officials – along with senior representatives from the FCA, the Bank of England and the business community – the panel meets up to eight times a year and has a full and active agenda. This group doesn’t just discuss, it’s more important to discuss and then make up your mind and act.

  • The third thing, and a big advantage, is that the government will play a leading role.

Unlike the EU and the US, the UK has a smaller number of regulators. Holistic is the overall framework set by the central government, so it can act decisively. Therefore, we can switch connections very flexibly.

And we have a firm, unified, single-minded government that puts decisive action first. For example, we have a plan to explore the possibility of applying DLT to bond issuance. Could the UK one day use DLT to issue bonds? I don’t know the answer yet…but let’s lead by example and try to find the answer.

We’ve done a good job of using encryption to improve government efficiency. We are exploring the possibility of using distributed ledger technology for customs and international trade to simplify the process required to import goods.

Fives

Finally, I announced today that the Prime Minister has asked the Royal Mint to create an NFT that will be released in the summer, signaling our determination to take this path and to be sure to paint it in more detail in the future.

So now, there is a real opportunity here to build on our edge in fintech, capture the capitalist energy that has made UK financial services a reality, and use it to unlock the potential of crypto.

This is not something that can be done in an instant, although many of you would like it to become a reality right away. We will try our best to reach the other side of success as soon as possible in a reasonable and responsible way.

Back to the topic, what does the future of cryptocurrencies in the UK look like? No one can be completely sure. But we believe that by making the UK a haven for cryptocurrencies, we can attract investment, create a lot of new jobs, and create a wave of groundbreaking new products and services.

We are on the cusp of change.

We have the opportunity to shape and lead it.

That’s what we’re going to do.

2. Related texts

  •  This Article Link:

https://www.gov.uk/government/speeches/keynote-speech-by-john-glen-economic-secretary-to-the-treasury-at-the-innovate-finance-global-summit

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