UK exploring “multilateral network” to meet blockchain regulation challenge

The UK’s Financial Conduct Authority (FCA) is working towards building a “multilateral network” to improve international cooperation around emerging technologies, the regulator’s Director of Competition and Economics revealed at Asia House this week.

Mary Starks, who is also the FCA’s Chief Economist, said the body was talking with like-minded regulators in global markets such as Singapore to encourage alignment on key fintech issues, including blockchain.

“We have a series of bilateral agreements with the regulators who take a similar approach to us, including Singapore, with the idea being that, if UK regulators can get comfortable with an idea, we can help other regulators get comfortable quicker,” she said.

“We would like eventually to get to a much stronger multilateral network whereby you don’t have to pick off every international jurisdiction from scratch.”

The insight, which highlights the tech-driven pace of change taking place in global markets, was one of several that emerged from the Asia House conference, ‘Blockchain: Separating Hype from Reality,’ held in partnership with DWF.

Sharing her experiences from a recent visit to China, Starks said she was “taken with the interest shown by Chinese academics, regulators and entrepreneurs in what we’re doing with fintech here in the UK. Every second question was about whether the UK is a friendly regulatory environment for cryptocurrencies and blockchain.”

Starks gave a keynote speech at the conference before taking part in a Q&A with Asia House Chief Executive Michael Lawrence, who was keen to know whether the pressure to regulate risked “choking off” innovation. This is a concern which the FCA takes seriously, Starks said, adding that it is in “the DNA” of regulators to focus on stopping things “going wrong” on their patch.

“It takes a strategic will” to overcome such an attitude, Starks said, but she made it clear that regulators like the FCA are well-aware of the need to “support innovation going forward,” – encouraging news for those worried about the stifling of new technologies by overzealous regulation.

For Starks, blockchain promises significant opportunities for global trade, predominantly by removing the “huge amount of frictional cost in financial services.”

But she also pointed to consumer risks around the emerging technology, especially related to cryptocurrencies.

“One of the risks that worries me is the fact that we haven’t been through a cycle of people making money and losing money,” she said. “Household finances are pressed. I think there are consumers who in their quest for yield may invest in things that ultimately prove to be a bad idea. If that problem gets too big then I think that’s a real issue for confidence in the system.”

Cryptocurrencies are, of course, the aspect of blockchain that has captured the lion’s share of public interest. But Starks suggested bitcoin’s bubble may have already burst. “I suspect that it will turn out that bitcoin is neither the most significant nor the most enduring application of blockchain technology, but it was certainly the first to hit the public consciousness in a big way,” she said.

Watch the Mary Starks’ keynote speech and her Q&A with Michael Lawrence at Asia House TV