FCA considers approving blockchain companies to provide related services in the UK

Baozou Commentary : Project Innovate was specially established by the UK Financial Conduct Authority to promote technological innovation. Currently, the project is reviewing a number of blockchain companies. In the first year of the project, 177 companies have been reviewed, of which 40 have been approved. Qualified companies can test blockchain products in the "regulatory sandbox". If the project goes smoothly, these companies will become the first blockchain companies in the world to obtain regulatory approval.

Translation: Annie_Xu

Consumers are one step closer to gaining access to products powered by blockchain technology after the UK’s Financial Conduct Authority (FCA) announced it is considering approving a “small but sufficient number of businesses” to use the process underlying cryptocurrencies.

The FCA, which is seen as the world’s most forward-thinking regulator in the fintech sector, noted that several organizations in the review phase are already developing blockchain-based, compliant consumer-facing products.

Blockchain appeals to banks because it provides a shared database across multiple locations that can serve as an immutable public ledger of transactions, with the potential to reduce costs and increase the speed of operations such as securities trade settlement.

However, some regulators have warned that the technology is less resistant to fraud and could affect financial stability.

Chris Woolard

Chris Woolard, FCA director of strategy and competition, said:

“We believe there are some interesting applications for blockchain and we are talking to businesses about ways to use it in financial services and how consumers can benefit from it or make compliance easier for businesses. Maybe there are areas where we can encourage the development of this technology.”

Blockchain-related companies are under strict scrutiny by the FCA as part of the agency's Project Innovate program. The project provides consulting services to companies, including start-ups and traditional companies, and is committed to developing top products that comply with regulatory policies. In the first year of the project, 177 companies have been reviewed, of which 40 have been approved.

The project includes a “regulatory sandbox”, a framework within which FCA-authorised firms can test products.

Woolard said:

A “small but sufficient number of businesses” are involved in developing blockchain technology as part of the project; the FCA will announce more details in the coming months.

If a company wants to provide lending or any payment services in the UK, it must be authorized by the FCA. If it is authorized by the FCA, it will become one of the first companies in the world to obtain regulatory permission.

Nick Williamson, CEO of Credits, a London-based blockchain startup, said there are currently few commercial products based on blockchain because the technology is still in the testing phase.

The Bitcoin hype has many people asking what blockchain is

To this end, Cambridge University is preparing to set up courses on Bitcoin's underlying blockchain technology.

Financial industry executives are beginning to flock to digital currency-related courses.

Ripple, a blockchain payment company based in San Francisco, is one of the few companies that integrates platforms and banks. This summer, Ripple partnered with Mizuho Financial Group of Japan and Santander Bank of the United Kingdom to pilot the application of blockchain technology in cross-border currency settlement and cross-border payments.

Jeremy Millar, founder of blockchain information consulting firm Ledger Partners, said that financial services currently account for more than half of the global blockchain market. The latest assessment report by Greenwich Associates shows that financial institutions will invest more than $1 billion in blockchain in 2016.

Jeremy Millar

Millar said:

“Reports suggest that blockchain could save $100 billion in post-trade settlement costs. Goldman Sachs estimates that $50 billion could be saved in the U.S. repo market alone. Stunning numbers.”

The UK government has stressed the need for new companies to challenge traditional businesses, especially in the financial services sector; policymakers and regulators have followed suit. According to a survey by Ernst & Young (EY), the blockchain sector sees the UK as the world's most friendly environment for the development of Internet finance.