The UK’s Financial Conduct Authority is to explore the potential benefits of blockchain technology, which underpins bitcoin, for use in the wider financial services industry, according to the regulator’s chief executive.
At the Financial News and WSJD inaugural Fintech Conference in London, Martin Wheatley also said the FCA is looking at the role regulation can play in the world of digital currencies.
He said the regulator was “interested in exploring possible benefits from blockchain technology” and “how it might be used elsewhere in financial services.”
The FCA is actively engaging with the UK Treasury on its review of digital currencies announced by Chancellor George Osborne in August, according to Wheatley.
Speaking in August at the launch event of Innovate Finance, the UK’s fintech lobby group, Osborne said: “These alternative payment systems are popular because they are quick, cheap, and convenient – and I want to see whether we can make more use of them for the benefit of the UK economy and British consumers. I also want to be alert to the risks that accompany any new technology.”
Over the past year, the potential of the technology underpinning bitcoin has piqued the interest of many in the financial services industry. Yet its close association with the digital currency, which has experienced wild prices swings, the collapse of a dedicated exchange and concerns over its use on the so-called dark web, has made regulators and large financial institutions wary.
However, Oliver Bussmann, group chief information officer of UBS, has said he believes blockchain technology has the potential to trigger “massive” simplification of banking processes and cost structures.
And in early September, the Bank of England released a report describing the blockchain as a “significant innovation” that could have “far-reaching implications.”
Eitan Jankelewitz, a lawyer in the technology practice at London-based Sheridans, said: “We are at the stage where regulators are beginning to openly pay attention to cryptocurrencies and the blockchain. They are not yet at the stage where they are regulating but they are now on the record as taking a closer look.”
The FCA is embarking on wider efforts to foster financial services innovation through its new Innovation Hub, a permanent team dedicated to help young fintech companies through the process of obtaining authorisation. The hub also exists to explore ways regulation can be adapted to support growth in the sector.