THE BLOG

FinTech Overlooked In Latest Industrial Strategy

05/12/2017 15:29 GMT

The broadsheets are teeming with headlines on criminal Bitcoin users, and the Government has been obliged to come out with a strong position. We welcome public recognition of the sector’s importance – as you will have read in many papers this week, it is globally worth £145 billion. But it’s important not to forget that the FinTech industry was largely overlooked by the Government’s new Industrial Strategy, already and quite literally last week’s news. This document is just as indicative of the administration’s view on cryptocurrencies as its reaction to the Bitcoin allegations, and it is troubling.

The UK has long been at risk of missing the boat on this sector’s exponential potential, as the many dozens of cryptocurrency brokers and exchanges hampered by British commercial banks’ stringency will testify. Yet, intriguingly, a strategy with a hefty onus on the digital economy completely overlooked digital currencies. Comb the strategy and you will find no more than a passing mention to virtual coins and blockchain technology.

The statement that ‘Investors in peer to-peer lending and many Fintech applications are more likely to trust large sums of money to jurisdictions with up-to-date and effective antifraud regimes’ is the only direct reference to FinTech in the whole 255-page document – the same document which claims ‘AI and the Data Economy’ as the first of the ‘Grand Challenges’ it tackles.

The paper seems even more cryptocurrency-light given that only in April this year, the Chancellor himself wrote an article on the very subject of the economic benefits associated with FinTech. Philip Hammond wrote in The Times, ‘Fintech is changing the way we bank and is one of Britain’s most exciting industries. It employs more than 60,000 people and contributes £7 billion a year to the UK economy.’ So why didn’t it have a bigger place in a ‘digital’-rhapsodic Industrial Strategy?

To the Government’s credit, the National Productivity Investment Fund has been increased from £23 billion to £31bn, £740m of which will go into ‘digital infrastructure’. The paper’s onus on innovation and productivity is also backed up with serious investment pledges, most notably £406m to fund teaching maths and digital & technical skills, and a new business basics programme to encourage SMEs to adopt new technologies, including ‘new accountancy software’.

But even though these measures are broadly favourable to FinTech, none offer it any specific support. If the chancellor really wanted the UK to be the most attractive nation to FinTech startups, there was little evidence to show for it here- what about enabling cryptocurrencies to open bank accounts in this country, or to make Pound Sterling deposits and withdrawals?

The bottom line is, the UK financial sector is still hostile to cryptocurrencies, and the Government has not intervened to encourage entrepreneurs to set up shop in London, as opposed to Hong Kong, Moscow, or Bratislava, say, which they are currently doing in droves. Poor politics, I think anyone would agree, not least while our divorce from the EU is ongoing.