The UK Financial Conduct Authority (FCA) has said it does not plan to regulate the blockchain industry for now as it believes the technology will need “space” to grow.
The news was delivered yesterday in a speech by Christopher Woolard, the FCA’s director of strategy and competition, who took a focus on innovation at the start of London London Fintech Week.
Describing innovation as an “iterative process”, Woolard said that it is “crucial” that innovators are given space to develop their solutions. He further framed the development of distributed ledger technology as a potential revolution in financial services, though he cautioned it has yet to be seen if the tech is “the panacea of all ills in the financial world”.
Moving onto the authority’s position on regulation of the blockchain businesses, Woolard said:
“The FCA continues to monitor the development of this technology but is yet to take a stance until its application is clearer.”
Woolard went on to state that he believes there are “regulatory and consumer issues” that will need to be examined as the technology evolves, such as how individuals gain access to a distributed financial network and which entities control this access.
Additionally, he cited levels of data security for users as a further “vital consideration” for the FCA.
The FCA regulates domestic financial firms providing services to consumers, and is also charged with helping to maintain the integrity of UK financial markets
Applications for regulators
During the speech, Woolard took the time to discuss the FCA’s Project Innovate initiative, launched in October 2014 to help startups improve policies and processes.
The FCA chief explained that the FCA will continue to work with firms developing distributing ledger technology solutions via the innovation scheme to ensure “consumer protections are being factored in during the development phase of this technology”.
Woolard further explained that the FCA had identified some “key opportunities” in applying the technology to the needs of regulators, which he termed “RegTech”.
He said:
“[This area] is an opportunity for us to understand how we can best support developments and potentially adopt some RegTech solutions ourselves.”
Of particular interest to the authority is whether blockchain technology can help companies across industries meet know-your-customer (KYC) or anti-money laundering (AML) requirements “more efficiently and effectively”.
The FCA is currently engaged in discussions with government and industry on the issue, he indicated.
Blockchain-friendly stance
To date, the UK has taken an extremely open stance on both digital currencies and blockchain technology, issuing a number of official statements and initiatives expressing a willingness to help the industry develop.
In October 2015, the economic secretary to the UK Treasury, Harriet Baldwin MP, spoke about the benefits of digital currencies and blockchain technology, explaining that the government was working to create the right regime for digital currency businesses that would attract both overseas investors and companies to the UK.
This January, a report from the UK Government Office for Science recommended a broad government effort to explore and test blockchain and distributed ledger technology.
The report, headed by the government’s top scientific advisor Mark Walport, contained proposals aimed at pushing for segments of the UK government to pursue applications of the technology.
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