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Ep 6: Is the UK on track to become a global hub for crypto?
46 Plays1 year ago
Join Dr. Lisa Cameron, MP and crypto policy expert, in a discussion with Emma Pike from Owl Explains about the UK's quest to become a global crypto hub. Dr. Cameron shares key insights from her report with actionable recommendations for the UK, emphasizing the urgency to keep pace with the EU. Tune in to this enlightening session moderated by Emma Pike, Consultant at H+K Strategies, for a closer look at the evolving landscape of blockchain and digital assets in the UK.
Find out more in our explainers at owlexplains.com
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Transcript
Introduction to 'Owl Explains Hootenanny'
00:00:06
Speaker
Hello and welcome to this Owl Explains Hootenanny, our podcast series where you can wise up on blockchain and web3 as we talk to the people seeking to build a better internet. Owl Explains is powered by Avalabs, a blockchain software company and participant in the avalanche ecosystem. My name is Silvia Sanchez, project manager of Owl Explains and with that I'll hand it over to today's amazing speakers.
UK's Crypto Ambitions
00:00:34
Speaker
So hello and welcome to all our Wise Owl listeners. I'm Emma Pike, I'm a member of the Owl Explains team and I am hosting today's podcast which is on the burning question, is the UK on track to become a global hub for crypto? We are recording in London today where the sun is shining and it's actually been shining all week and it's pretty hot here for the UK.
00:00:58
Speaker
But it's hot here in other ways too. So the UK government declared last year that it wants the UK to be a global hub for crypto and fintech. And there is a lot of work underway to figure out how to get there. There are also plans afoot for a digital pound.
00:01:16
Speaker
And it's London Tech Week and the door to number 10 Downing Street has transformed into kind of more ones and zeros spelling out London Tech Week. Prime Minister Rishi Sunak gave a keynote speech a couple of days ago calling the UK an island of innovation. And it seems that Andreessen Horowitz agrees because they've announced that they're going to be opening an office in the UK in the very near future.
00:01:41
Speaker
So there is a lot going on and it feels like a great moment to be asking the question, is the UK on track to become a global hub for crypto?
Constituent's Crypto Scam Sparks Inquiry
00:01:51
Speaker
And I'm delighted to welcome Lisa Cameron MP who is going to help us answer that question. So Lisa is the Member of Parliament for East Kilbride. She is also
00:02:03
Speaker
chair of the all party parliamentary group on crypto and digital assets. So she is literally at the heart of the policy and regulatory discussions on crypto in the UK. And I can't think of anyone better to help us answer this question. Lisa, welcome. Thank you so much for having me. Thank you for joining us. I know how incredibly busy you've been of late. So you've published a report through the all party parliamentary group on crypto, which you chair.
00:02:32
Speaker
And it is all about how to realize the UK's ambitions in this area. So the report contains over 50 recommendations and is the first parliamentary report of its kind in the UK. And in the lead up to the report, you ran an inquiry for 10 months, receiving input from all kinds of different people.
Founding the Parliamentary Crypto Group
00:02:54
Speaker
So I'm really interested in the final report, but also in the process of the inquiry to get
00:03:01
Speaker
So, but before we get into all of that, I want to just take you right back to the very beginning. How did your interest in this area begin? What motivated you to get involved in the debate on crypto? Yes, I mean, I joined Parliament in 2015 as the first clinical psychologist to be elected. So I don't have background in financial services. In fact, I think my constituents believe that
00:03:30
Speaker
Westminster needed a psychologist at that point. So that's how I arrived. Most of my work in parliament has been to date on disability and health issues. So this was very new to me, like it has been to so many people across the UK. And I stumbled across it when a constituent contacted me, unfortunately,
00:03:55
Speaker
they had befallen what I now know is labeled a rug pulling scam where they had invested money and the people they'd invested to and the way they'd done it, the money had disappeared and they couldn't find any redress in the current system. So they contacted me and asked me
00:04:17
Speaker
Lisa, can you put me in touch with the person in parliament who's leading up in this work so that I can discuss my experience with them? And I said, well, of course I'll do this. I then began to have a look through the all party parliamentary groups, which there are many, and I couldn't find anything on cryptocurrency at that point in time. So I asked my researcher,
00:04:44
Speaker
Can you find out if this is a kind of one-off thing and that's why, you know, there isn't so much interest in developing this area of work in the parliament? She came back and said to me, well, you're right, there's no all party group at the present time on cryptocurrency. There have been no debates in the House of Commons at this time, but what I can say is it's not a unique situation to your constituent because
00:05:12
Speaker
Firstly, you know, this is reported quite widely in the press. But secondly, at that point in time, we believe there were well over three million people in the UK who were engaged in the sector. So there just seemed to be this complete dichotomy between where the public were at in terms of their engagement and where the parliament was sitting at that point in time. So that's how the group
00:05:40
Speaker
and when the group was founded was just shortly after my involvement. I was fortunate to meet with Crypto UK who agreed to provide the Secretariat, which is extremely important that it's a trade body or a professional body rather than an individual company. So we were very careful to make sure that we had specialist Secretariat input in that sense
00:06:07
Speaker
and that it was going to represent the sector as a whole rather than any particular individual or company's interest. So I began my journey of learning at that point.
50 Recommendations for UK Crypto Policy
00:06:20
Speaker
And I have to say, my goodness, it's been transformational
00:06:24
Speaker
over the past 18 months. I feel I started from a position of obviously concern and skepticism, and I still have, you know, consumer protection, as you know, at the core of everything we're doing, including the inquiry report that was published. But I also see great potential for the industry. And as you see, the report is also very much about how to support government to achieve the vision that the UK will be come
00:06:54
Speaker
global hub of cryptocurrency and fintech development and innovation. Great, thank you so much. So now let's talk about your inquiry that led to the report published last week. So you launched the inquiry in August 2022, so last year,
00:07:16
Speaker
And over the course of 10 months, you've spoken to or had written input from all kinds of different stakeholders. So operators, regulators, industry experts, the general public, the city of London, the Law Commission. So this gives you a pretty unique kind of bird's eye view of the debate on crypto in the UK. Can you tell us a bit more about the inquiry process and what you learned through it?
00:07:47
Speaker
Yeah, I mean, it's been amazing, as you say, we've had so much engagement from right across the sector. So I have to thank everybody who's been involved because without their input, we wouldn't have got to the publication date and to be able to produce a report that we feel is very thorough.
00:08:05
Speaker
We felt that we needed a real cross section of input of different perspectives. So from those who are engaged in industry, from those who were creating a legal framework, you know, the law commission, from those who were
00:08:25
Speaker
regulators and having to adapt to the new digital revolution in a sense that's before us and also of course very importantly members of the general public so we asked for written submissions and we were inundated really by those who wanted to engage and we were able to collate all of that information over a lengthy period of around about five to six months
00:08:51
Speaker
And then towards the latter part of last year, we had evidence sessions where we tried to pull out themes such as central bank digital currency, where we were looking at what was happening in other jurisdictions, particularly with Mika in the EU.
00:09:12
Speaker
where we were having a think about the challenges that face companies who want to come here and, you know, take part in this innovation island, as the Prime Minister has said, and to start up and scale up. And we heard about, you know, many of those challenges, including, you know, registration, licensing, the FCA process, and even just, you know, basic things like how difficult it is to start up a bank account.
00:09:40
Speaker
and pay your staff. So there are many things that have to be tackled and the report was one way of pulling all of these threads together to look at the challenges that we need to overcome to create
00:09:57
Speaker
this cryptocurrency and digital innovation hub and at the same time to make sure that we were highlighting the potential in the areas we feel government should be focused on for the future and particularly keen on jobs and careers of the future for our young people right across the UK.
Beyond Finance: Blockchain and Web3
00:10:18
Speaker
Yeah, so, so I clearly through this process, you know, you've gathered an awful lot of wisdom in this space. And so I'm going to invite you now to be an honorary owl. And I'm going to invite you to now perch with me on the owl explains tree of web three wisdom. Now what on earth is that? I hear you ask. Well, the tree of web three wisdom is a tree.
00:10:46
Speaker
It has five branches, which are essentially five principles to guide regulatory thinking on crypto, blockchain, and Web3.
00:10:55
Speaker
And as our honorary owl guest today, I want you to perch with me on each of these branches and give us your bird's eye view of the current state of play in the UK. So are you ready? Let's perch. So branch number one is understand the technology and its uses. So what we're trying to say from this branch is that policymakers need to understand
00:11:21
Speaker
the paradigm shift of blockchain and crypto and their breadth of application before rushing in to regulate. So there's so much noise and focus on crypto and there are, as you've alluded to, there are very good reasons for that. But it also drowns out the bigger conversation about blockchain as a new and better architecture for the internet.
00:11:45
Speaker
So how well do you think the UK policymaking community understand sort of the nuances and the differences between crypto and blockchain and the many applications of the technology? Well, what I would say is not well enough, but we've certainly come a long way in the past 18 months. So we started off from the point where we were
00:12:12
Speaker
really focused in the first part of setting up the APPG, the first six to 12 months of educating ourselves in the parliament. And we came from quite a low baseline, so people may have heard me say before, but we did have discussions in the parliament where
00:12:29
Speaker
People were experts committing spoke to us about finance, decentralization, and fiat. And individuals were saying, why are we speaking about cars? Are we not speaking about finance? So we brought ourselves from trying to learn the terminology of the sector, which actually is quite vast in terms of CBDC and then the different concepts. But in terms of the blockchain,
00:13:00
Speaker
position of having no debates to now having a number of debates in the parliament. We've also come in the past 12 to 18 months to having statements from the minister on these issues including the consultations particularly for the CBDC and you know a lot of movement now very positive I think signaling from government. You could tell from the questions that I received
00:13:20
Speaker
We've come as a set from
00:13:29
Speaker
in my debate this week that there are MPs who are interested and who understand what's happening. But yes, we have to do so much more to reach out to members of parliament because I think this technology is really transformational and is going to change the way we live our lives in so many ways.
Young People's Digital Engagement
00:13:52
Speaker
Not just in terms of finance, it has implications for health,
00:13:58
Speaker
has implications for UK aid spending potentially?
00:14:04
Speaker
in terms of transparency and making sure that finance gets to the most vulnerable, which is of course what our taxpayers want to see, has a real input into arts and culture, IP, all of these types of issues and in terms of smart contracts as well.
00:14:31
Speaker
Whilst we don't perhaps have to understand the ins and outs of the technology itself, I don't particularly understand how the workings of my mobile phone come together, but I think the most important thing is that we understand the utility and we realise very quickly, and that's why my next debate, and I can preempt that, I applied for it today,
00:14:54
Speaker
and hope to have it in the very near future is going to be about digital innovation and careers of the future because we have to make sure that we are skilling our young people and re-skilling those who perhaps are in industries which are going to change to make sure that we can be this innovation island that the Prime Minister speaks of and that we have the necessary skills and understanding to move forward.
00:15:21
Speaker
Yeah, absolutely. Absolutely. And I mean, it's so fascinating to hear you talking about use cases in health and aid spending and IP and everything. I mean, it's so interesting hosting this podcast because we
00:15:37
Speaker
We get to talk to entrepreneurs who are building on blockchain, many of whom have projects that have got nothing to do with crypto trading or financial instruments. So we've spoken to Maria Bustios. She's a journalist building a news, independent news channel on Web3 where readers can pay reporters directly for truly independent news.
00:16:04
Speaker
We've spoken to a company called Lemonade providing crop insurance in developing countries. We've spoken to a team at Deloitte who are working on making disaster relief faster and more efficient.
00:16:18
Speaker
So some of these projects don't even have a token that's visible to the end user at all. It just operates in the background as part of the kind of bigger tech solution underpinning the project. So I'm 100% with you that we don't need everyone to understand the intricacies of how the tech really works.
00:16:38
Speaker
but to understand instead the kind of utility and all the various things that it can be used for is important I think. Yeah and just to add there we had this really amazing meeting in the parliament which sticks in my mind on the web 3 which was with the children's parliament and we had the MPs, the members of the House of Lords and the children in the room
00:17:04
Speaker
And we had Roblox and many other companies who are in this sector. And they were asking who in here understands Web 3? And of course most of the children put their hands up.
00:17:18
Speaker
not so many MPs, not so many members of the House of Lords. And that's when I realised we have this digital generation ahead of us who is just, this is just so natural to them, you know, and we're playing catch up really.
Tackling Crypto Misconceptions
00:17:35
Speaker
But they were so clever and they said to us, I was just really amazed how
00:17:43
Speaker
understanding the world limitations as well because they said but you know you have to make this safe for us because this could be amazing for our studies we could use web3 we could use a metaverse to go back in time in history and feel the experiences go to geographical sites etc they spoke about all of this
00:18:04
Speaker
but they said it's not healthy for our mental health to be in a virtual world all day so we want to have the guardrails basically that make us safe and I just thought that was really insightful from people so young as to the limitations as well as the great potential.
00:18:24
Speaker
Yeah, that's really remarkable, isn't it? Right, so I think we need to move on to branch number two now. So branch number two is beware of misconceptions. So we know that our youngsters are really on top of this, but what about some of the misconceptions that you've come across, I imagine, from the elder people that you've been talking to?
00:18:50
Speaker
Yeah so many people will say when we started this journey they were saying well I think this is a bit of a wild west so I don't think you know we should be bothering with this in the UK or in the parliament and then we had to kind of explain well this is happening already there are millions of people engaged so you know like my constituent if we don't have regulation in place then
00:19:17
Speaker
These people will not be supported in what they're doing. And this is becoming more and more mainstream. So just a year ago, the figures I was given were three to four million people involved. Now it's reaching five. So it's growing. And so we had to have those types of discussions, a misperception that it was on the fringes. And we didn't need to bother with it. I think there's also a misperception, geopolitically, that
00:19:47
Speaker
in that sense, in that, you know, China and other jurisdictions are really very far ahead technologically. And we, you know, geopolitically need to think about those things too, particularly when it comes to central bank digital currency.
00:20:05
Speaker
misperceptions about the blockchain and that you know that this is a great place if you want to evade sanctions etc to be involved in the sector and I'm sure you know we did take evidence that this happens but some of the literature we were given from those experts who track this said
00:20:28
Speaker
that traditional financial services also have these issues and this sector doesn't generally have it to more degree but the important thing is that the blockchain technology means that transactions are traceable.
00:20:44
Speaker
and therefore being able to harness that capacity means that it's not for the long term going to be the place with the appropriate regulatory structures for those who wish to be non-compliant I suppose in terms of finances. So I think there's quite a lot of misperceptions
00:21:09
Speaker
I had misperceptions at the start, too, because I thought it was all about finance. And then when I had the opportunity to speak to lawmakers from Switzerland, they were telling me, Lisa, you have to think about it much more broadly. We're thinking about it here in terms of research, education or universities in terms of employment, careers and jobs.
00:21:34
Speaker
skills that are needed for the future. They're thinking obviously in terms of interoperability with other jurisdictions you know and also looking at those other use cases that we discussed in term that I'm very interested in. I actually have the foreign commonwealth and development office in my constituency so I'm very interested in international aid
00:21:58
Speaker
So those types of issues that hadn't really come to my mind at first, because I thought I was dealing with something that was solely financial. But with the NFTs and everything developing, this is not just an industrial revolution in terms of industry.
Regulating Tokens Without Stifling Innovation
00:22:16
Speaker
It's actually cultural as well. And I think it could have a significant impact akin to the web being developed.
00:22:28
Speaker
Yeah, yeah, absolutely. And actually, you know, that that leads us really nicely on to the next couple of branches, which are I'm going to take them together, branches three and four. So branch number three is classify tokens sensibly, which really kind of relates to this idea that actually
00:22:52
Speaker
blockchain and crypto, it really isn't all about finance and financial instruments. Tokens can be absolutely anything. I mean, you mentioned NFTs, but that's just one example. A token is just a digital representation of literally anything. And then branch number four is regulate according to
00:23:11
Speaker
context and use rather than the technology, which is a sort of related point. So, and clearly, you know, there's this debate raging in the US, particularly at the moment with this slew of enforcement actions.
00:23:27
Speaker
coming out of the SEC. There's a jurisdictional tussle between the SEC that handles securities or financial instruments and the CFTC that handles commodities and now you have Congress stepping in and starting to work on a bill that could provide some clarity. But there is this
00:23:48
Speaker
misconception that blockchain crypto is all about finance and financial instruments and unless it's cleared up then it risks leading to a not very sensible regulatory definition and treatment of tokens and essentially the kind of stifling of innovation with overly onerous regulation. So where do you think the UK policy making community is on this? Do you think
00:24:12
Speaker
Are they veering towards thinking everything is financial and needs financial regulation or are they looking at each token for what it truly is and what its role is within a particular use case and then kind of regulating accordingly?
00:24:30
Speaker
Well, we did have the Treasury report that came out which suggested gambling, you know, regulatory regime. The government, you know, the minister was very clear the other day in our report, supports his position that that's not the position of government or that the UK is going to take, that we're looking at financial services regulation in the main. And, you know, there are good reasons for that. So in terms of being able to generate taxation,
00:24:56
Speaker
That wouldn't happen under a gambling framework. In order to have the most robust and experienced individuals who are able to regulate on their robust consumer protection element, that happens more so under the financial services framework than the gambling one.
00:25:18
Speaker
And again, in terms of the UK's position, because this is global, we're all looking at it from our own countries, but this is about interoperability as well, and it's global, and it's being discussed by government heads across the world as well.
00:25:39
Speaker
So we have to think about, you know, making sure that the UK framework is not an outlier compared with the rest of the world and with Mika coming on board. I think we do have this framework that needs to be progressed within 12 to 18 months, as I said in the report, in order to position the UK as a leader in the sector within a timious manner. So I think
00:26:05
Speaker
In the main, we are looking at financial services regulations, but I think there's going to have to be a nimble approach to looking at the utility of tokens and what the use cases are and what it is we're actually dealing with, and quite a pragmatic
00:26:21
Speaker
way of looking at that and I do believe that government are you know trying to have that oversight and overview in terms of classifications etc because we need something that's workable in order to attract those companies that you're speaking about and those investors and to generate that innovation because we don't want to stifle that innovation here at all we do want
00:26:48
Speaker
This is a real opportunity, you know, I didn't vote for Brexit, I just say that up front, but we are where we are and it does give the UK the opportunity to create its own bespoke regulatory framework and position itself.
UK's Global Tech Position & Collaboration
00:27:07
Speaker
at the helm of, you know, developments and with the turmoil to some degree in the US that you've described in terms of positions being taken and with Mika coming on board and, you know, congratulating them for all the work they've done on that. I think being a second mover can have advantages too in terms of competitiveness. Yeah, yeah, great. Yeah, so our final branch is Think Global.
00:27:36
Speaker
So, I mean, we've touched on this already. The UK is already quite a leader in the world in terms of tech more broadly and fintech. What is it that you think drives that?
00:27:55
Speaker
Well, I mean, there's so much expertise here already. And, you know, we have fantastic academic universities, the top universities in the world, you know, across the world. So people want to be here and they want to be setting up business here and they want to be drawing on all of that expertise. But we also have a framework already that I think is seen as being robust and yet competitive and
00:28:25
Speaker
you know one which enables innovation and I think that's you know where we want to be for the future and two in terms of you know incorporating this digital transformation that's coming downstream. So I think we're in a good position just now but in order to maintain that and make sure that we enhance it
00:28:49
Speaker
We do need to address some of the issues I mentioned like, you know, practical issues like opening bank accounts, streamlining the FCA process because today only 42 companies have been able to set up. We can't be, you know, a global innovation hub if we only have 42 companies. So we have to address these issues and the debate this week was a way of highlighting that to the minister again and I believe he, you know, has taken
00:29:17
Speaker
those issues on board which were raised by a number of MPs, not just myself, but globally as well.
00:29:24
Speaker
young people, the young people who came to speak to us, they live in a global world. The world has opened up for them more so than it ever was for me when I was young because it was about could I travel somewhere. They're speaking to people right across the world through technology, through digital technology every day. They're seeing things that I would never have seen and they live in an international community.
00:29:54
Speaker
And so the UK needs to have collaborations, partnerships. And I think that's why if we can move ahead in a competitive position, the interoperability aspect is going to be vital.
Securing UK's Crypto Future
00:30:07
Speaker
But given the leadership position that already exists here, we could be well placed to be at the helm of this amazing transformation in digital technology that's happening.
00:30:20
Speaker
Yeah, but as your report indicates with its 50 plus recommendations, there is quite a lot that needs to happen in order for that to be the case. So we don't have time to go through all 50 recommendations, but can you give us the headlines, the sort of top three to five things that you think government needs to act on?
00:30:38
Speaker
as a matter of urgency in order to secure the UK's position as a global hub in crypto and fintech? Yeah, absolutely. We want to see a cross-governmental approach. So that could be led by a crypto czar, or the minister said he was wanting to sort of lead that up. But it has to involve the different sections of government that we spoke about, education, business,
00:31:04
Speaker
foreign and commonwealth and international development. It has to be about skills and jobs as well as about finance. So there's so much work that needs to be done on health and all of the other avenues. So I really feel government has to have this cross-departmental reach
00:31:25
Speaker
We did also speak about just the importance of having this regulatory framework within the next 12 to 18 months because with Mika coming on board, we already saw a report from Pitchbook, I think it was, not so long ago, which suggested that.
00:31:43
Speaker
When regulatory clarity happens, that investment moves in that direction. So we've already seen some business move from the UK, the US, to the EU. And what we need to do is harness our potential to keep business here and generate new business here.
00:32:03
Speaker
So really feeling that the timescale is very important. Moving on the central bank digital currency, I think is also going to be very key in terms of positioning of the UK. And I'm very, very keen, as I said, on the interoperability aspect and something that I've started to think about as well, given other jurisdictions are working right across the world with some of the CBDC developments,
00:32:32
Speaker
is could we harness and engage the Commonwealth in terms of the work we're doing with the CBDC to give them perhaps an alternative to other finances that might be available, such as from China, et cetera. So I think there's just so much to be done. It can't be done just by one person, either the minister or myself.
00:33:00
Speaker
Our role really then is to harness the potential of the parliament and get so many people involved across party that no matter who's in government, you know, after the next general election and if there are no changes, either way that this work continues at pace and the UK can realise its vision.
00:33:22
Speaker
Well, Dr. Lisa Cameron, thank you so much for your time today and for all the great work you're doing. It's immensely exciting. It really is just thinking about all of the possibilities that you've mentioned. I'm going to let you get back to your important work now, and I hope you also get to enjoy some of the sunshine. Well, thank you so much. And thank you to all the Wise Owls for listening. Bye for now.
00:33:47
Speaker
We hope you enjoyed our Hootenanny. Thank you for listening. For more Hootful and hype-free resources, visit www.owlexplanes.com. There, you will find articles, quizzes, practical explainers, suggested reading materials, and lots more. Also, follow us on Twitter and LinkedIn to continue wising up on blockchain and Web3. That's all for now on Owl Explains. Until next time!