How the UK Has Set its Sights on Becoming a Fintech Haven in the Wake of Brexit

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Significant policy changes and reform of London’s business listing system following Brexit are set to trigger a “digital big bang” in the UK in an attempt to accelerate the nation’s growing fintech industry, according to a recent review commissioned by the government. .

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The report, published in February 2021, highlights that regulatory uncertainty over Brexit and growing global competition could undermine the UK’s position as a leader in the world of fintech if no action is taken.

The review was conducted by former Worldpay chief Ron Kalifa and is one of those commissioned by the government to help strengthen the UK’s status in the world of finance and technology.

As things stand, the UK is the European leader in the number of companies operating in fintech and new fintech efforts are being launched. However, the complications of Brexit could lead to a loss of ground between the United Kingdom and countries such as Germany and France as one of the world’s preferred destinations for establishing a fintech effort.

Both the financial and technology sectors have been under greater pressure from rivals since the UK left the European Union in early 2021, but it is possible that Brexit may offer a little more freedom to turn the nation into a prospect. even more appetizing to retain and build. on the support of the developing fintech industry.

With global fintech revenue expected to reach more than $ 300 billion by 2022, there is much justification behind the UK prioritizing its fintech industry as a key area to retain businesses and work to attract start-ups. Let’s take a closer look at how the UK looks to capitalize on the growing market for post-Brexit finance technologies.

Fintech passport.

The UK government will use a visa system aimed at fintech technology professionals to try to fill any emerging gaps in the sector’s workforce as a result of Brexit resulting in a loss of access to the important skills base. the EU.

The move has already been welcomed by the fintech industry, in which many actors had been concerned about access to skilled workers before the conclusion of the Brexit process.

According to Sunday Telegraph reporter, chancellor Rishi Sunak will soon announce a plan to help the UK fintech sector retain the talent it needs to continue as a world leader in the industry.

The fintech visa program is expected to help the UK maintain its place as a thriving place for fintech unicorns to thrive. After leaving the EU, the UK lost its automatic right of professionals from all over Europe to work in the country. At the same time, many skilled European workers have left the UK due to the climate of uncertainty and negativity caused by Brexit.

With global competition for fintech talent within the industry, cities like London are facing new competition from European destinations such as Berlin, Barcelona and Amsterdam, which are becoming increasingly popular for fintech professionals with the right to work across the board. EU.

This exodus is exactly what the UK wants to prevent, and the danger posed by the situation has been underscored by Ricky Knox, CEO of fintech bank Tandem, who said: “Technology visas are fantastic and essential if we are to to maintain a competitive technology and fintech sector, “he added. “More than half of our coders are from outside the UK and some have already left because of Brexit.”

Space to house crypto.

Another aspect of the review has called on the UK to review its focus on cryptocurrency regulation as a means of accommodating more fintech companies in the future.

Recent restrictive measures by UK regulators include bans on the sale of cryptocurrency derivatives and a record against money laundering that have created a somewhat hostile environment for decentralized or blockchain technology companies to set up in London. .

The review notes that other markets have been moving forward with the development of specific frameworks for cryptography, such as the EU’s proposed cryptocurrency markets. He also says the UK needs to act quickly to review its position on these issues before competitors begin to overtake the technology center.

A tailor-made regime for cryptographic assets should adopt a functionally and technology-neutral approach, in accordance with the principles of the current regulatory framework, as well as the concept of “same risk, same regulation”, while adapting to risks arising from activities related to cryptographic assets, “the report states. “It should also be flexible enough to meet future challenges, such as how decentralized finance (DeFi) should be regulated.

In addition, the review also recommended that the UK continue its participation in the Global Financial Innovation Network (a working group of national regulators) and lead the way in cryptographic policy and regulation.

One particular sector that could benefit the UK is decentralized financing, better known as DeFi. In a market that has gone from less than $ 1 billion to about $ 40 billion in less than a year, the fintech technology surrounding DeFi applications built with cryptocurrency blockchains could be the key to ensuring sustainable growth. as technology continues to transform the financial landscape.

The rise of the stock market.

The government has also identified public quotes as a key way to help generate better financial stability. Prime Minister Boris Johnson has reportedly met with executives from Deliveroo, Revolut and other technology companies to persuade them to be listed on the London Stock Exchange.

Once again, the recent report suggests a reduction in the percentage of shares held by public investors to avoid diluting the first sponsors of fintech startups, as well as the “golden share” or dual-class share structures that could allow the founders to better maintain control. of their companies and remain safe from hostile acquisitions.

This call for quotation reform in London may have come at an ideal time, as companies such as Deliveroo, Wise and Darktrace were rumored to be debuting in 2021. Elsewhere, other companies such as Revolut, OakNorth and have found in the midst of OPI speculation as the valuations of financial and technology companies have grown in the wake of the Covid-19 pandemic.

This move could attract significant levels of investor interest in London. While many IPOs today focus on institutional investors, there are companies that can allow individuals to participate in initial public offerings that would otherwise be inaccessible. Freedom Holding Corp. (FRHC), a NasDaq-listed company, has a platform called Freedom24, in which individuals can apply to participate in the IPOs of their choice, albeit with a financial threshold of at least $ 2,000.

There are more traditional organizations like Fidelity that also offer participation to the general public, but only at the much higher threshold of $ 100,000 to $ 500,000 in domestic assets.

Another traditional platform is TD Ameritrade, which is owned by the giant Charles Schwab Corporation (SCHW), allowing IPO participation for selected account holders. The threshold is quite high, though. To be eligible to participate in an IPO, your account must be worth at least $ 250,000 or you must have completed 30 transactions in the last 3 months.

The true value of these IPOs listed in London could be found in the UK’s plan to build its attractiveness as a fintech refuge after Brexit. With a sustained uproar over financial technology and more compliant regulations, 2021 will be an important year in the battle to prevent talent from coming out of these shores towards the attractiveness of the EU.

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