Why London (UK) Is Becoming a Global Blockchain Hub
The combination of a strong judiciary, friendly regulations and access to capital and the global banking system allocated in London is making the United Kingdom, Canada and Australia attractive to blockchain and crypto entrepreneurs.
Similarly, offshore locales such as Bermuda, Malta and Mauritius are also making great steps to develop a regulatory framework that will encourage blockchain and cryptocurrency innovation.
Shaping the right regulatory framework is vital because startups can move, almost overnight, to a new location. A case in point is Miami-based cryptocurrency startup CBlocks, which recently announced it would move to Canada where regulatory expenses are significantly lower.
The economic implications are huge.
Becoming a global hub for blockchain and crypto has enormous economic impact: We are in the midst of a gold rush that could be worth $2 trillion as blockchain reimagines everything from how stock exchanges clear trades to how we record home mortgages.
However, for this technology to truly reach its potential and create the internet 2.0 age, the industry needs workable regulations. Those rules must protect good businesses while safeguarding the interests of consumers and investors from scams and frauds.
The world already has over 1,600 cryptocurrencies, including BTC, that have gained outsized media attention due to their wild price swings. At the same time, blockchain-based products and services are being developed by countless established firms and startups.
The industry is on the move.
IHS Market analyst Don Tait estimates that blockchain-enabled economic activity could collect to $2 trillion within the next dozen years. As this market develops, these inherently virtual, internet-based companies can move their activities almost anywhere. That makes the regulatory framework of each jurisdiction critical to deciding which localities will attract these businesses and which will not.
London is fast becoming a global hub because for years Britain has encouraged blockchain and cryptocurrencies through programs like the Financial Conduct Authority’s Project Innovate, which promote startups navigate the regulatory environment.
Australia has drawn attention, too, for its plans to replace its current stock exchange clearing system with blockchain. It’s known among industry insiders that Canada is in exploratory talks with blockchain vendors to do likewise.
Interestingly, the company behind the Australia stock exchange project is the American blockchain startup Digital Asset Holdings. The firm boasts among its investors Broadridge, a U.S. financial technology provider that’s among the S&P 500.
Sensible regulation is the key.
Any state or country that wants to encourage blockchain innovation needs regulations focused on 3 areas:
1. In a world where custody rules are based around paper systems and traditional clearing houses, the industry needs clear rules for the custody of assets on blockchains. Industry-wide custody standards around the use of signatures and permissions-based controls are needed to eliminate a key risk in blockchain investing.
2. The industry needs clear guidelines that set out the requirements companies must follow to engage in a public token or coin offering — a move that Bermuda is doing by creating a new legislative framework for initial coin offerings.
3. The industry also needs clear rules governing how various types of crypto-companies must register with the relevant regulators.
Developing sensible regulations takes a collaborative approach that involves listening to industry leaders, establishing task forces and ultimately writing laws that encourage innovation.
Besides Bermuda and Malta, South Korea is following that approach. The country is in the process of classifying blockchain entities after talking with 44 government ministries, 17 regional municipalities and consulting with more than 165 institutions.
Countries that want to attract blockchain commerce need to pass laws that have come about as a result of a considered, consultative approach.
After all, if you’re not sure what you are doing, it’s better to take things slowly. I’d rather wait for a sensible law than be saddled with a bad one that could remain on the books for years.