Govt blockchain understanding ‘lamentable’

Written by Peter Walker
12/02/2019

A panel of experts at the London Blockchain Week conference took aim at regulation yesterday, with one calling the authorities’ understanding of the emerging technology ‘lamentable’.

Jonny Fry, chief executive of sector advisory firm Team Blockchain, noted that at industry events he’s attended in other countries, delegates have told him how lucky he is to be regulated by the Financial Conduct Authority (FCA) – “a regulator that actually listens to industry”.

But while he praised the recent progress made by the FCA, Fry also expressed concern about many in the UK government and some within the financial regulators not understanding blockchain.

“The current regulatory system is not sustainable,” he commented, complaining about having to spend between 15-20 per cent of a company’s cost base on complying with often vague rules that can be backtracked on. Fry said he was looking forward to digital assets having certified controls embedded within them to help tackle this problem and reduce regulatory costs.

Peter Smith, an regulatory veteran and now consultant with FinTechReguLab, explained that MPs and civil servants have “a tough job” to both protect the consumer from the risks associated with new digital assets, while helping to drive financial technology forward and protecting the FinTech industry that has blossomed in the UK.

“The government is looking to protect consumers, jobs and the tax revenue to the exchequer,” he stated.

Smith also pointed to the benefits of setting standards in order to avoid restrictive regulation, something he said he’s seeing being to happen within the world of blockchain and he was instrumental in setting up within the pensions industry.

Referring to TEX, the pension transfer exchange organised by the Tax Incentivised Savings Association (TISA), Smith recounted conversations with the FCA about the asset management industry having to set its own standards to improve the ease of moving pension money, under “threat” of being regulated against.

“We used the same principles to develop the regulatory sandboxes,” he added.

The panel’s moderator, Eric Van der Kleij, chief executive at C4DR, added that what has developed out of the FCA’s sandbox - the Global Financial Innovation Network - “could be the start of genuinely global regulation” on things like blockchain.