The UK’s Financial Conduct Authority (FCA) recently announced that several groups developing consumer-facing and compliance products that use Blockchain technology are now going through a pre-approval stage.
The FCA is now considering approving a “small but significant number of firms” using the Blockchain technology, with UK consumers now one step closer to being able to use products and services.
In an interview with the Financial Times, Chris Woolard, the FCA’s director of strategy and competition revealed that the FCA is even considering encouraging it:
“We do think Blockchain has got some potentially interesting applications and we are talking to firms thinking about how to apply that to financial services and how it could benefit consumers or indeed make the business of compliance easier …There may be areas where we might want to encourage it a bit”.
Woolard later explained that the companies developing blockchain technology are part of a project supported by the FCA called Project Innovate. This program offers advice to companies and new startups who are trying to develop and introduce cutting-edge products. The Project support includes a so-called regulatory laboratory, where companies can test products with temporary FCA authorisation. In the first year alone, 177 companies were assessed under Project Innovate and approved 40 of them.
According to Jeremy Millar, founder of Ledger Partners, an advisory firm focusing on blockchain technology, financial services make up over half of the global blockchain market and they are still growing.
Regulators have long been criticizing the technology, saying that digital currencies represent a real menace to the financial stability and that they are an instrument for of fraud. And up until now, this has been a real barrier, but it seems that now, the interest of several other big players is growing as well.
The blockchain has introduced a new shared public database with an open record of transactions, capable of cutting expenses while being able to help develop and modernize the financial sector. Millar highlights that the cost savings are potentially huge from implementing blockchain technology, “Reports have claimed up to $100bn could be saved on the post-trade settlement process by using blockchain. Another estimate by Goldman Sachs said there could be $50bn of savings in the US repo market alone. The numbers are huge.”
San Francisco-based blockchain payments company Ripple, who is already integrating its platform with banks. This summer, it partnered with Japan’s Mizuho Financial Group, and Santander in the UK, the first banks in their respective countries to pilot blockchain technology for cross-currency settlement and cross-border payments.
The former Chancellor, George Osbourne, famously bought bitcoin at an ATM back in 2014. More recently, the House of Lords held a hearing on the potential for blockchain technology to improve the functioning of the UK economy. The government has long been pointing out the need for new challenges in financial services, so the UK might soon be the first country in the world approving products that use the Blockchain technology and cement its place as a world leader in fintech.