In a marked shift, the UK regulator, the Financial Conduct Authority, said it wants to ensure positive developments such as Bitcoin are supported by the regulatory environment.
Speaking last week at Bloomberg London, FCA Chief Executive, Martin Wheatley, announced Project Innovate, the FCA’s fast track initiative to help support finance industry innovation, setting the goal for “an FCA that creates room for the brightest and most innovative companies to enter the sector”.
Wheatley reflected on three questions: (1) How does the FCA encourage innovation in the financial service market? (2) Does it do enough to promote competition and create room for new entrants into the market, particularly those with novel business models? (3) Does FCA regulation more broadly serve the needs of innovative businesses? Quite rightly, he recognised several developments as having “transformed finance in improbable timescales” among them virtual currencies, crowd funding and peer-to-peer.
To date, the FCA has remained officially silent on regulation of virtual currency activities, preferring to take a hands-off wait-and-see approach. This has not necessarily been bad for UK-based Bitcoin businesses. Coupled with the UK tax authority, HMRC’s, pragmatic March announcement of favourable tax treatment for virtual currency activities, the UK is now one of the best jurisdictions for Bitcoin startups.
Signs are the FCA’s supportive regulatory environment for developments “that promise to improve the lives of consumers or clients” may before long provide much-needed regulatory certainty and crystallise the UK’s status as the go-to digital currency jurisdiction. It remains to be seen if, when the FCA eventually announces its official position on virtual currencies, Project Innovate results in light touch regulation or, even, 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!