The new prime minister must take the UK’s crypto ambitions seriously to avoid falling behind other countries, former chancellor Lord Philip Hammond told Financial News.
Lord Hammond criticised the government for not delivering on its promises to turn the UK into a crypto leader as the EU presses ahead to “regulate this properly”.
Speaking to FN as part of Barron’s Live, Lord Hammond said: “I’m a little disappointed that the UK is as far behind as it is, because I think the UK not only has the opportunity and the track record of being pretty good at exploiting regulatory opportunities…but clearly post-Brexit thinking about our future as a financial services centre, we also have the burning platform that ought to give us the motive to get on and do this.”
Rishi Sunak, who became the UK’s prime minister on 25 October, was chancellor when, in April, the UK government revealed a series of steps to turn the UK into a global cryptoasset technology hub.
But these have yet to bear real fruit, according to Hammond, amid a turbulent time in UK politics where the country has seen three prime ministers in two months.
“I hope with him [Sunak] as prime minister we will see the UK moving to become the recognised leader in this [crypto] space,” Hammond told FN. “There’s been a lot of distractions during this period, you might have noticed, and politicians perhaps have not been as focused on setting out the rules for this environment as they might be. I hope that’s now going to change.
“I hope the government will do what it said earlier this year it would do…create a proper framework of regulation for those who want to move forward with infrastructure development in this space.”
Promoting innovation in areas such as crypto and the wider financial services landscape will be key to ensuring the UK returns to growth, Hammond said.
“There’s an increasing awareness that we haven’t got a growth agenda,” he said. “The Liz Truss government — short-lived — had a single tool for growth: cutting taxes with borrowed money. That’s not going to happen. The government before that had an agenda around levelling up and doing fantastic trade deals with the US. That’s not going to happen.”
Hammond joined crypto technology firm Copper as an adviser last October. He said that he has seen an increasing number of institutions looking to jump on the blockchain bandwagon since.
For example, Goldman Sachs and JPMorgan use a blockchain system to settle bilateral overnight trades between the banks, Hammond said.
This year’s crypto winter, Hammond added, had not put banks off investigating how to use blockchain. The crash in prices had filtered out some short-termist businesses focussed on retail price hikes, leaving those focussed on institutional applications to look towards gains further down the line.
The winter “helped focus attention on the long-term potential of the underlying to technology to improve and perhaps revolutionise how financial services works,” he said.
“I think there was too little regulation in this space. It was a poorly regulated space,” he added. “Our regulators are struggling with bandwidth post-Brexit…that did chew up a lot of regulators’ time and attention.
“They are struggling to recruit and retain people that really understand the crypto environment and the blockchain infrastructure that underpins it.”
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