As London Fintech Week is well under way, one hot topic of discussion are the so-called cryptocurrencies. Cameron Penny, head of finance at Hanover Communications, looks closer at this type of currency and the future of finance in general.
Cryptocurrencies: the Future of Finance?
by Cameron Penny
Developments that change our world are hard to spot and their success often rests on the tenacity and vision of their advocates against the orthodoxy of the masses. This is true of those Internet giants who are only now maturing and facing their first real tests of regulation and policy scrutiny – witness Google’s tussle with the EU Commission over comparison search which has many hallmarks of early battles such as that over Internet Explorer.
A similar pattern is at work with cryptocurrencies which are part of a wider ecosystem of disruptive technology that promises rather than threatens to change the way that the financial system works. With their promise of ultra-high security and near-instant transfers cryptocurrencies are themselves maturing from a clandestine instrument for transferring the wealth of those involved in illegal activities to a technology that wholesale and retail banks are seriously examining for implementation in their payment systems. Like a lot of new developments online, the UK has a leading position. This goes alongside the burgeoning market for Peer-to-Peer lending which is revolutionising how UK consumers save and borrow. Both developments have one thing in common – the use of the internet and advanced transfer platforms to bypass the legacy systems of incumbent operators.
So what should be the response of policymakers? Well part of the answer will come later this year when the UK Parliament’s BIS Select Committee starts its formal inquiry into the digital economy. Peer-to-Peer lenders have already been brought under the aegis of the Financial Conduct Authority and are due to be included in the ISA tax wrapper which will open these platforms up to a vast number of new consumers. Meanwhile cryptocurrencies continue to exist outside the mainstream and whilst there may be questions over how long the currencies themselves may survive and which platforms will prosper and which will not they have a major contribution to make as the UK continues to modernise and reform its payments system. We have already seen the move to seven-day switching as part of the Current Account Switching Service, the underlying technology could clearly help the UK’s retail banking system move to same day switching and instant transfers. Both developments that would help boost competition in the sector and improve the consumer experience.
Where the UK leads it’s to be hoped it continues to and that we don’t repeat the historic mistakes of giving away our early advantage to others.
About the author
Cameron Penny provides strategic communications counsel to government relations teams across the financial services sector. His experience is in wholesale banking, general and monoline insurance, trade associations and major consumer brands in the sector. He has also delivered a number of high-profile campaigns whilst achieving legislative change in support of client business objectives.
Cameron’s client experience includes Goldman Sachs, MetLife, Lloyds Banking Group and BIBA.
Prior to his employment at Hanover Communications, Cameron has worked in the UK Parliament, a technology start-up and for a range of leading corporates at a public affairs consultancy.