Tough new US tech laws could open up a whole new UK market
The US, known for its friendly approach to tech, is looking to toughen up rules against Web3 and blockchain technologies, giving the UK a fresh chance to seize billions worth of investment, writes Iain Mansfield
A burgeoning branch of Fintech promises a £10bn opportunity for British business – if only we get the regulation right. As a report by Policy Exchange, published today, argues, an increasingly hostile regulatory regime in the US, the UK has a golden opportunity to seize a larger share of this market.
The City of London has long led the world in financial innovation. From the invention of the modern company to the pioneering work of Lloyd’s Coffee House in insurance, much of today’s financial ecosystem was invented in London.
Indeed, the British defeat of Napoleon owed as much to the ability of the government to raise funds from London’s vibrant financial sector as it did to the valour of Britain’s sailors and soldiers. The Big Bang of the 1980s revitalised the City and, in 2021, a study found that London was the second most innovative city in the world.
One area that offers much potential is Web3, a decentralised technology based on blockchain that offers to revolutionise our use of the internet. Although the sector has had to shake off a “casino capitalism” image, now tech companies are rapidly developing new products with serious applications.
Established companies like PayPal, JP Morgan, and Nike now offer blockchain products, and Web3 technology has been used to deliver aid to people in Ukraine, send cheap remittances to unbanked people in the developing world, digitise driving licenses in California, and pay for carbon credits in India.
The US has traditionally led the field in this sector but a harsh wind is blowing in California, driving US firms across the Atlantic. Red tape and an increasingly febrile regulatory environment is pushing Web3 companies to establish branches outside the country – and some have even shut down their US operations. A recent survey found that 12 per cent of crypto hedge funds are considering relocating from the US to jurisdictions that provide a more proportionate regulatory regime.
As a global Fintech hub, with a regulatory approach characterised by the “same risk, same regulatory outcome” approach, Britain is now increasingly attractive to investors. With £77bn invested globally in blockchain start-ups, a conservative estimate suggests that the UK could easily secure new assets worth £10.7bn – supporting 36,000 jobs.
The Prime Minister has made his goals for Web3 clear. As Chancellor, he said it was his ambition to make the UK “a global hub for crypto-asset technology” which brings jobs to the UK. Importantly, he added: “by regulating effectively we can give them the confidence they need to think and invest long-term.” Since then, a number of major US firms have opened London branches.
Now the FCA and other regulatory authorities need to follow through.
New concepts such as digital wallets, stablecoins and tokens may sound unfamiliar to consumers now – but, with the right regulatory approach, could become as familiar and well-used as banking apps and social media.
Our public services also need to be ready to make the best possible use of Web3 and other emerging technologies such as AI. These technologies are coming – and the UK and London should be at the heart of it.