The UK is at a critical juncture for its digital assets industry, with long-awaited rules for cryptoassets and stablecoins expected to be published in the coming months. With this in mind, Ripple convened a UK Policy Summit earlier this month with industry partners to discuss how the UK can remain internationally competitive in this fast-growing sector.
There is a huge opportunity for digital assets in the UK. With growing consensus that blockchain technology will transform financial markets, the UK already boasts a globally leading, competitive financial services center. And with particular strengths in FX, capital markets, insurance and professional services, the UK has all the building blocks to be a global leader in digital assets.
However, with neighboring jurisdictions like the European Union and other global financial centres like Singapore and Hong Kong already further ahead with cryptoasset regulations, there is increasing pressure on the UK to move faster with its rulebook. To explore how best the industry can support this critical work, Ripple hosted the summit in partnership with Innovate Finance, the UK’s trade association for fintech, and the UK Centre for Blockchain Technology, a consortium of universities.
The digital asset opportunity for the UK
The forthcoming cryptoassets rulebook is an opportunity for the UK to champion blockchain technology and innovation.
The benefits are directly relevant to the UK Government’s Financial Services Growth and Competitiveness Strategy. They include faster and more efficient cross-border payments, 24/7 trading and instant settlement, lower barriers to finance for SMEs, improved investment opportunities, as well as greater efficiency in corporate treasury and supply chain management.
Above all, there is an opportunity for the UK to become a global hub for digital assets, attracting investment, businesses and employment.
Digital assets are one of the most cost effective and direct routes to unlocking economic growth and the key lies in the legal and regulatory framework. Digital assets regulation plays a critical role as it increases confidence in the technology, particularly for institutional or regulated actors who make up much of the financial services industry.
Regulation also has the effect of raising the bar for firms operating in the sector, reducing the likelihood of consumer harm.
Three key themes from the UK Policy Summit
1. Time is of the essence for the UK to show that it is open for business.
The UK now has a ‘second mover advantage’, as it can learn from the experiences of other jurisdictions and introduce a regulatory regime that supports the benefits of digital assets as well as mitigating the risks.
This means proportionate, risk-sensitive and outcomes-focused digital asset regulation which supports innovation.
However, the window of opportunity is narrowing, and one clear theme that emerged from industry participants is the need to provide regulatory clarity with greater pace and urgency.
2. Stablecoins are critical to the growth of digital assets markets
Stablecoins are a critical enabler of the digital asset ecosystem, and use cases are evolving. As well as being used as on- and off-ramps to cryptoasset markets, they are increasingly utilized for trading and settling transactions in digital assets, as well as for cross-border payments.
During the summit, panellists discussed the need for a UK regulatory regime that is proportionate to the risks and encourages the adoption of this beneficial innovation.
And, for the UK to successfully build a digital assets hub it should ensure that a variety of stablecoins can be used in the UK, including those issued overseas.
Given the critical role of stablecoins, the FCA should consider bringing the stablecoin rulebook forward to provide clarity as soon as possible.
3. Tokenization is likely to transform financial markets and digital asset policymakers need to be bold in supporting adoption.
UK Finance have estimated that digital assets could represent as much as 10% of global capital markets by 2030, equivalent to a value of $4-5 trillion.
It could lead to large efficiencies—for example in reporting, clearing, settlement and collateral management—which have already been demonstrated in pilots around the world.
Adoption needs focused commitment from the UK government and regulators to remove the barriers to adoption. Many of these barriers are legal and regulatory in nature.
Panelists reflected that progress so far has been fairly piecemeal, and a bold, ambitious and comprehensive approach is needed. Input will be required from industry and regulators to identify and remove unnecessary barriers and ensure a truly level playing field for innovation.
Next steps for the UK
Ripple has a significant footprint in the UK, with a large regional office hub in London as well as longstanding support for the UK developer ecosystem and talent pipeline, via support for the XRPL grants program and the University Blockchain Research Initiative (UBRI).
The UK Policy Summit highlighted the opportunity for the UK to compete internationally as a digital assets hub, powering the government's growth and competitiveness agenda and bringing tangible benefits to UK firms and consumers.
However, this will require greater pace and progress on the cryptoasset and stablecoin regulatory regime and other barriers to adoption of digital assets. We look forward to collaborating with industry, regulators and digital asset policymakers to support this vital work.
Learn more about Ripple’s public policy perspectives.
