London Needs to Embrace Blockchain Post-Brexit to Stay Relevant Says Leading MEP
The UK’s imminent exit from the European Union (EU) has left some politicians with some uncertainty about London’s future as the leading financial center.
Kay Swinburne, a Member of the European Parliament (MEP) for Wales, made her views known as she spoke to the Business Insider on February 13. She believes that UK needs to grasps the blockchain technology after the exit from the EU to enable the City of London to stay relevant.
She believes the City of London can remain relevant by becoming advocates of new technologies like the blockchain and not just mending existing systems to make them work post-Brexit, but actually “leapfrogging.”
The Relevance of Blockchain Technology
Blockchain otherwise called the Distributed Ledger Technology (DLT) is the name of the underlying technology of bitcoin, a digital currency that facilitates peer-to-peer payments without the involvement of a third party. DLT makes it easier for organizations and individuals to transfer money around the world by bypassing conventional mediators like banks and governments.
DLT is additionally very customizable as it has unlimited applications for different businesses and processes. For instance, it can be used in trading and clearing of monetary instruments, to keep and share records and to facilitate payments or enhance transaction monitoring.
Banks and other financial institutions have recently taken advantage of this technology due to its inbuilt security and trust checks which can cut out intermediaries in processes like settlement and clearing, in turn, reduces the cost associated with transactions.
Santander is the first UK bank to utilize the blockchain technology in its transaction. Recently, Santander collaborated with American Express partnering together with financial technology firm Ripple to accelerate cross-border payments between the US and the UK by utilizing blockchain technology. Santander estimated in 2015 that the associated savings with using blockchain technology could be worth up to $20 billion.
Kay Swinburne added that London’s markets could be “more efficient” and therefore more competitive if given the impetus to search for ways to leverage blockchain technology to their advantage.” She likened the impact of blockchain technology to that of the ‘Big Bang‘ moment which occurred in the 1980’s when Britain experienced rapid economic growth, especially in London.
The Importance of Regulatory Bodies
Swinburne stated that she would like to see the Bank of England and not just only the FCA get involved in blockchain technology. She adds “maybe the monetary policy of the future doesn’t involve issuing notes all the time, maybe it involves other alternative payment systems.”
In a 2017 Discussion Paper by the FCA, it noted that by using the blockchain, financial institutions could enhance their administrative efficiency, upgrade operational resilience and decrease the cost of regulatory reporting. These could reduce financial and technical barriers and help promote competition.
Swinburne further stated that “We’ve got proof of concept of DLT in so many areas. It now needs to be scaled up. We’ve got to take some risks. We have the opportunity to really make a difference in a way that I don’t think Europe post-Brexit is going to be able to do.”
She concluded by saying:
“We need to start opening up our minds as to how we leapfrog. The conservative status quo is now too risky with Brexit. We need to leapfrog to stay relevant. The City needs to stay relevant.”