Innovate Finance paper for Treasury Committee inquiry into Crypto-Assets
A paper produced by Innovate Finance and Shearman & Sterling for the House of Commons Treasury Committee inquiry into the crypto-asset industry
Innovate Finance, working with Shearman & Sterling, has submitted a comprehensive evidence paper to the House of Commons Treasury Committee inquiry into crypto-assets. Details of the inquiry can be found here.
In this paper we make the case that:
- Crypto-assets - or digital assets - are part of a technological transformation of finance, which alongside and in conjunction with other technology, will drive a new wave of digital innovation across financial services and the systems and infrastructure that underpin them.
- The application of digital assets and digitalisation in financial systems and services will create significant, real-life value and benefits – with far-reaching use cases that will improve economic productivity, facilitate new forms of consumer-to-business and business-to-business payments, improve the flow of capital to sustainable and growing businesses and tackle financial exclusion. There is an opportunity for the UK to benefit from this economic and social value, both domestically and globally.
- This will shape the future of finance, including financial markets and payments systems, around the world. The UK's approach will therefore determine our position in global finance as well as contributing to future UK growth, jobs and productivity.
- Digital assets provide an opportunity for the UK to be the leading global financial centre, building on our track record of innovation, financial services and our legal system. This calls for agile regulation, providing consumer and investor confidence, mitigating risks, supporting competition and new entrants, and promoting innovation.
Analysis produced by Innovate Finance specially for the Treasury Committee shows that in recent years the UK has been the leading destination after the USA for investment in distributed ledger technology (DLT) and crypto-asset based businesses. However, other countries are now catching up. So far this year, Singapore has overtaken and pushed the UK into third position.
To regain our position at the top, the UK needs to become a clear beacon of a ‘digital democracy’, building on its long-established traditions and reputation, while radically innovating in other areas. The paper sets out an action plan with short, medium and long term measures for government and regulators, including:
- Establishing a joined-up strategy across Government, regulators and the legal system that is alive to the potential benefits as well as the risks of crypto-technologies, and provides clarity for businesses and consumers interacting with them.
- Ensuring a continued review of UK law and regulation to ensure it provides the basis for recognising digital assets and digital transactions.
- An improvement in the responsiveness and service levels of the UK’s regulators in their processing of applications for new businesses or new business launches -without reducing the level of scrutiny.
Digital success can be achieved by the UK. However, we must think creatively and comprehensively in developing our standards and making the UK more attractive to customers opting to use our market, as they have done for centuries.