Stablecoins, NFTs and financial services

ended 05. April 2022

Big news in the City yesterday. The UK Treasury announced it will regulate stablecoins, which is a major milestone on the road to the acceptance of digital currencies. The Treasury will even mint its own NFT this year. Few Qs:

  • How do you think stablecoins and crypto generally are set to impact your sector?
  • Are you preparing for your clients to start asking about digital currencies with greater regularity?
  • What ramifications will the regulation of stablecoins have for financial services as a whole?
  • Are stablecoins an absurdity? After all, they're linked to fiat currencies. Or are they a useful attempt to get people to understand digital currencies? 
  • Could stablecoins be a Trojan horse for riskier cryptocurrencies?
  • UK Financial Services Minister John Glen says the UK sees "enormous potential in crypto" and has a "detailed plan [for] harnessing the potential of blockchain and supporting the development of a world-best crypto ecosystem". Do you believe him or is he making it up as he goes along?
  • With the cost of living crisis causing considerable financial pain for millions, is the timing of this announcement irresponsible or timely? Why?

Any other thoughts, jot them down. No need to answer every question.

7 responses from the Newspage community

Regulation is inevitable. Crypto currency started out as a punk but it will end up in the comfortable shoes of conformity. It is encouraging that The BoE is out there looking to understand the upstart and bring it into the fold. The trouble with regulation is that it is made by the establishment and therefore it is probable that any resultant governance will be created out of unconscious and unintentional bias that comes from accepting thinking. A clear concern would be that a regulated Crypto changes from the Sex Pistols into an ABBA tribute band and therefore loses the appeal of those that currently support it and offers little benefit and therefore attraction for the masses.
It's absolute bovine excrement. Value is created by two things, natural resources and/or labour. That’s it. Has everyone forgotten what fiat currency is? Have we forgotten what fiat currency does? Day by day, I feel as if JG Ballard is penning the world narrative. What problem will crypto solve? The world is on fire, FFS, and we’re about to enter a period of ecological collapse. You’re telling me people in government are sat talking about a fornicating digital asset. I suppose it’s true; people get the politicians they deserve.
I think Central Banks the world over have been wrestling with what to do about Cryptocurrencies. The UK government seem to have decided inaction is no longer an option, for fear Bitcoin and other non-stable Cryptos will replace Fiat currencies altogether. So it makes sense to regulate the sector now, before it's too late, and control the industry's development. There's geopolitical motives at play as well. I suspect this announcement is being made in lock-step with a similar strategy from the US, desperate to fend off China, and maintain the US dollar as the world's reserve currency. Left unregulated, were Bitcoin or similar to become the default currency of choice, it would threaten the tax base of governments everywhere. Restricting their support to stablecoins helps ensure the continued relevance of Fiat currencies, whilst hopefully diminishing the popularity of non-regulated cryptos.
I've never been convinced of cryptocurrencies, even if they become regulated. Of course, like everyone, I wish I had bought a few hundred Bitcoins back in the day as I'd now be a multimillionaire. However, that doesn't mean that they have any real place in the world. Ask yourself, what problem do they really solve? Thirteen years after its launch, Bitcoin is still far too volatile to be of any real use as a currency. Any currency that can gain or lose 20% of its value in a normal month is too risky for everyday use. Imagine saving for your holiday in a cryptocurrency, only to see its value fall significantly and then you have to tell your family "sorry no Disneyland this year kids, it's Cleethorpes for us!".
"I am yet to be convinced that crypto currency is a sensible investment. Yes people have made money but it still feels more like a speculation."
Having bought my first Bitcoin in 2013, I'm a long time supporter of crypto currencies and blockchain technology and firmly believe they will change many industries, not just financial services. We already receive enquries from clients seekign to use proceeds from profits made from crypto currencies as their deposit, and clients looking to borrow against them, and expect to recieve an increasing amount of such enquiries going forward. Many will turn their noses through fear of the unknown, and cryptos reputation as everything from get-rich-quick schemes and scams, through to concerns over money laundering. Being far more familiar with the concept than most though we welcome innovation by the treasury in this area, which if anything I'd say is overdue.
The announcement from the UK Treasury on stablecoins like Tether is somewhat unexpected, although a sensible one in my opinion. The FCA on the other hand are making it virtually impossible for UK based crypto companies to operate here, forcing them all abroad. Nice "token" gesture from the treasury minting their own NFT. Perhaps they should pass the message onto the FCA though, before we lose every innovative crypto company to places like Singapore, Malta and Switzerland.