- Cryptocurrency Derivatives Cryptoassets have changed significantly in the last 10 years – we’ve gone from the original Bitcoin whitepaper in 2008 to a world populated by over 2000 different
- The Cryptoassets Taskforce brought together the FCA, HM Treasury and the Bank of England to explore the impact of
cryptoassetsand distributed ledger technology (DLT) in financial services. The taskforce’sfinal report was published at the end of October.
- There are examples of
cryptoassetsand other applications of DLT delivering beneficial innovation in financial services. However, the taskforcehas also identified 3 major harms: to consumers, to market integrity and the risk of financial crime.
- The FCA, HM Treasury and the Bank of England are each taking a number of steps over the coming months to address these harms and to encourage future beneficial innovation.
Note: this is the speech as drafted and may differ from the delivered version.
Ten years on
Cast your minds back to 2008.
Cryptocurrency Derivatives For many of us, the defining event of that year was the collapse of Lehman Brothers, the moment when the enormity of the financial crisis was brought home.
But beyond the memory of Wall Street bankers emerging from skyscrapers with boxes in hands, what will 2008 also be remembered for?
Let me try a few. Michael Phelps eclipsed Mark Spitz’s record to achieve 8 Olympic Golds at the Beijing Olympics. And despite millennium-bug style predictions of a black hole catastrophe, the Large Hadron Collider at CERN safely went online for the first time.
But 2008 also marked the publication of the original Bitcoin whitepaper.
Much has changed in 10 years, including with cryptoassets themselves. We’ve gone from Satoshi Nakamoto’s original vision, to a world populated with over 2000 different cryptoassets; from a narrow discussion of 'Bitcoin’s Blockchain' with a capital B, to a broader debate around distributed ledger technology (DLT) and its application to financial services.
We learnt many lessons from the crisis, not least the need to understand new, complex products and their wider impact. The scale and pace of cryptoasset change – and what it might mean for consumers and markets – also requires vigilance from policymakers.
And so, in March earlier this year as part of its wider fintech strategy, the Government announced a taskforce between the FCA, HM Treasury and the Bank of England on cryptoassets and distributed ledger technology. And as part of the Budget at the end of last month, the taskforce published its final report.
Today, I want to briefly lay out the key issues identified by the taskforce and the action we’ve recommended to tackle them. Although our report focused on both the underlying DLT and cryptoassets, today I will focus mainly on the latter.
Winding the clock back
First, I want to briefly provide some context. Four years ago, the FCA established Project Innovate to enable financial innovation in the interest of consumers. Through initiatives like the Regulatory Sandbox we have helped firms to implement emerging technologies, from cryptoassets to advanced analytics, in an innovative, but also compliant, manner.DLT has been an incredibly popular technology tested in our Regulatory Sandbox – with almost half of the fourth cohort using some form of DLT or cryptoassets.
DLT has been an incredibly popular technology tested in our Regulatory Sandbox – with almost half of the fourth cohort using some form of DLT or cryptoassets.