Transcript

Julia: Hello. My name is Julia Streets, and welcome to the podcast series StreetsTalksTo. In each episode, I interview leaders from some of the most influential firms, bodies and initiatives in the financial services industry. In each episode, we explore what’s at the very forefront of innovation and change and we think about some of the challenges facing clients, and also the industry at large. Together we uncover the opportunities that exist both today and as we look ahead.

We hope you enjoy the series, which you can find on all good podcast channels, and all the episodes are listed on our website, streetsconsulting.com. You can find the episodes used in the hashtag #streetstalksto if you’re looking for it on social media. Thank you for listening, and welcome to StreetsTalksTo CryptoUK.

Let me tell you a bit about CryptoUK. It’s all about influencing policy, shaping regulation and facilitating innovation. CryptoUK exists as a cohesive, credible voice for the evolving UK crypto industry. As an independent industry body, CryptoUK represents the UK’s crypto asset sector, works directly with policy makers and market players to advocate for better education, mutual understanding and fair and balanced policy. It has more than 80 members, including crypto natives, service providers, custodians and institutional investors. Today I’m joined by Ian Taylor, Executive Director and Su Carpenter, Head of Community, Programs and Content.

Ian Taylor, Executive Director of CryptoUK has spent more than 20 years in investment banking and has held many senior roles across trading, treasury and risk management. Today he’s still involved with a major global bank. As an Executive Director of CryptoUK, he has built a community of some of the most influential industry participants, and drives campaigns for fit for purpose regulatory frameworks in the UK, Europe and beyond. He’s clearly passionate, and an effective advocate for the digital asset sector, and believes firmly in its ability to create greater access to better financial services, globally. Ian, welcome to the show.

Ian: Hello Julia. It’s a pleasure to be here. Thank you ever so much for inviting me along. I’m looking forward to a stimulating discussion today.

Julia: Su Carpenter is the Head of Community Programs and Content for CryptoUK, and she brings an extensive background in marketing, communications, community programs and event management. Having worked across traditional finance, challenger banks, FinTech and crypto, her roles have encompassed global remits and strategy for large corporates, and implementing launch programs for startup tech businesses. She has a very strong interest in the crypto industry, firmly believing the UK has nurtured and developed a wealth of experience and opportunities for the sector to grow and to thrive. Su, welcome to the show. Great you could be here.

Su: Fantastic. Thanks a lot, Julia. It’s great to be here.

Julia: I don’t know where to begin really, because I’ve got so many questions to ask you about CryptoUK. But I want to actually start not so much with you, but with the industry at large. When we think about some of the members, 80+ members are part of CryptoUK at the moment… What’s particularly keeping them awake at night? Ian, can I come to you first of all?

Ian: Well, regulation is primarily the largest threat, perhaps that’s a strong word. But most definitely the biggest focus for all industry players, whether crypto natives that started a business to provide services specifically for crypto products, or traditional incumbents, whether that be banks, accountants, lawyers that are offering services to crypto market participants.

New regulation is coming. We already have a raft of regulation that’s in the pipe, not just in the UK, but across the globe, and this regulation impacts every single market participant in some shape or form. The work we do is specifically to bring together the community in the UK, to really help develop an understanding as to the minds of the policy makers, and work with both the public and the private sector to at least understand where the issues are and then help frame effective policy that doesn’t stifle innovation.

Julia: Wonderful. And we’re going to dig a little bit deeper into what type of regulation is particularly at play at the moment. Su, can I come to you for your thoughts? As you’re out talking to your members, are there particular areas that come to mind?

Su: Absolutely. Ian makes a good point around regulation. And what we’ve seen off the back of that, particularly towards the tail end of last year, is a lot of our members having a lot of issues around financial promotions, and marketing as well. I think it does play nicely into the point that Ian’s made around regulation, that actually the people that regulate this space, so the Advertising Standards Authority and some of the other governing bodies, are really being quite vague in terms of what financial promotions and marketing can look like for the crypto sector.

What we’re tending to see is a lot of movement of goal posts. So where you can say one particular statement one day, potentially, for some reason, the next you can’t. And there doesn’t seem to be any clear reason or rationale as to why that is happening, so we’re finding our members are spending a lot of money on direct marketing and advertising campaigns that aren’t really being able to run their course, and aren’t really helping them to achieve what they need with their business objectives, in terms of actually keeping business coming in and marketing their own products and services.

Julia: I can’t even begin to imagine what it’s like to run a campaign when the rules are changing around you all the time as well. I know the way you talk about your community of members, and I was setting those out in the introductory remarks about who’s involved with CryptoUK. Talk to me a bit about the large financial institutions as well, and the relationship between the large banks, if you like, or the banking environment, and CryptoUK members. Some of those earlier stage firms.

Ian: What we’ve seen in the adoption in the institutional space for crypto is first through the door would be your family offices. Then you’d see your fund managers, hedge funds, adopting a strategy to invest parts of their portfolios into digital assets as an investment asset. However, naturally as banks, traditional financial institutions, tier one institutions, have a much greater compliance and regulatory hurdle to be able to access what is largely an unregulated industry, both in terms of the crypto asset or the digital token, versus lots of the market participants that provide liquidity and provide access, and on ramps to investing.

What we are seeing is, just within the last 6-12months, a greater interest directly in our trade body to get involved, whether you’re a financial institution, a payments provider, a payments rail, an accounting firm, a consulting firm. Because what we are seeing is if you haven’t already, if you’re a financial institution, publicly issued a new product offering that’s involved in crypto, whether that be custody or an investment opportunity for high net wealth clients in banking for example, we know from our discussions that if they haven’t publicly announced this, there’s discussions going on behind the scenes.

There’s strategies in play to be able to, I guess, not lose out on what is a completely new, innovative industry that is, in my opinion, pretty exciting and offers quite a lot of benefits to traditional investment, and even the technology itself is innovative and provides a whole host of societal benefits. It can reduce frictions and reduce costs as well, in certain aspects.

Julia: I’m still hearing stories about banks limiting the ability to make payments to crypto, or ability to open bank accounts. Does that still exist?

Ian: Yes. Unfortunately, as much as we do see financial institutions wanting, or if not already offering a product or services related to crypto. That’s one part of the organisation. Let’s say that’s the FX trading desk in capital markets business, or the private bank offering opportunity to high net wealth individuals.

We do see a large problem in the other aspects of the bank, mainly around the corporate banking areas of these banks, that still do not have an appetite to provide banking services to crypto related businesses. We ourselves at CryptoUK had a problem getting a banking relationship, and we are not a crypto business. We are a trade body advocating for the industry.

There’s a lot of work that we are doing, and there’s a lot of work still to be done to address this, but it is an existential threat for UK PLC, where crypto businesses cannot have basic banking services, because you cannot run a business without having a bank account.

Julia: It’s important just to highlight that point, because as you say, it does still go on. I think there are some enlightened organisations in this world who get the potential, and there are others still holding back as well.

Su, I know you look at the world of payments through crypto. You were talking earlier about advertising regulation, marketing regulation as well. I’d love to just get your thoughts about, how do you help deliver payments?

Su: We obviously can’t influence that directly, but what we do tend to do is work really closely with a lot of partner organisations that have strong relationships into the UK banking sector. One example is the work we are doing at the moment with UK Finance, and that initially started off the back of us trying to do some consumer protection work, and looking at the prevalence of scams and fraudulent activity within the crypto space, and the work our members were doing to try and mitigate that.

But that’s actually really led us into some longer and more detailed conversations now, about how we can help our members, in terms of being able to facilitate payments, and to help educate the traditional finance providers around what fraudulent activity looks like, and the fact that a lot of our members are obviously very good, strong, solid, reputable businesses, but they’ve seen themselves basically thwarted from being able to carry out their day-to-day work, because anything that has the crypto tag or crypto marker on it is seen as a high risk payment.

We’ve still got a lot of work to do, but we’re really starting to educate now, with the help of the guys at UK Finance, who give banks more of a risk appetite in terms of being able to manage payments through to crypto exchanges, and payment service providers as well. We’ve still got a long way to go, but we are actually now starting that dialogue, and actually connecting our members with the members of UK Finance to start looking for solutions instead of just addressing the problems.

Julia: It’s a really key part, isn’t it? And one of the other areas that I hear people talk about a lot with crypto is thinking about the taxation implications as well. HMRC are looking at this as much as all the other considerations we’ve been talking through.

Ian, can I get your thoughts on, are your clients thinking about how to engage with the treasury around taxation questions?

Ian: That’s a very, very hot topic. Indeed they are. Some even want to lobby the government to change some specific recent new tax legislation, such as digital services tax, which has a carve out for exchanges that provide services for buying and selling of securities. They’re not included in the digital services tax because the digital services tax was designed for online platforms, such as Amazon, for example, to pay the tax in the particular jurisdiction where the good or service is utilised.

However, HMRC have doubled down recently on their website, stating that crypto asset exchanges, which all, in effect, operate exactly the same as an exchange such as the London Stock Exchange, enabling people to come and buy and sell in digital assets, will have to pay a tax, which can have detrimental effects to UK PLC. We’re hearing that exchanges may well put the prices up of their fees. And that will obviously impact a retail decision, or even institution decision, as to what exchanges they use. And that’s just one area. There’s many other aspects of taxation where we see a lot of areas where we’re seeking guidance.

The work that we are doing is specifically to drive thought leadership around these areas, specifically within decentralised finance, or DeFi. Where new products and service is, that it’s not clear how a tax liability will be dealt with, and even how to report that or calculate that, but also to generate a list of questions that we will target directly at HMRC, to really help them understand what the community has, in terms of questions, and issues and frictions, but also to get HMRC to perhaps issue some additional guidance to what they already have.

Julia: And that, in and of itself, of course, is the role of an industry body, to take the voice and the concerns of its members. It’s been a great conversation so far, because what I really appreciate is the fact that you’ve actually very clearly articulated some of those big anchor challenges that everybody’s facing at the moment. Then also, Ian began to get into, what is your role in terms of representing and actually engaging in debate and discussion.

Su, earlier you were talking about the marketing side of things as well. Give us some other examples about the role that CryptoUK plays.

Su: We’ve covered quite a few. Obviously, one of our main roles is to be here to represent our members. But one of the things that we obviously try to do is to foster the relationships with regulators, with policy makers and decision makers, and really drive that discussion, and make sure that we are representing the voice of the industry with all of those key members and key players.

We have a lot of activity going on in the background, that not necessarily all of our members will see, or not necessarily all of the public will see, in terms of really trying to engage both at a political level, and really, as we said, with the regulators, with the legislators, and with the public sector, and with our members, and really trying to connect all of those parties to have that ongoing dialogue, and really to start to discuss some of the issues, and start trying to find solutions.

We obviously need to make sure that our members stay connected and communicated with. We obviously want to make sure that we are doing a lot of work around education as well. And I think one of the main roles that we have, moving forward, is around education, and making sure that decision makers, policy makers and politicians are better educated in this space, and we can really help to shape the future of where the direction of travel will be for the crypto industry.

Julia: I think some of the remarks that have flown out of the conversation, around maybe there are some concerns about security, there are some concerns about cyber security. I even wonder whether this naturally sort of tips into concerns around money laundering. And education is very much at the heart of setting the record straight on behalf of your members as well. I do wonder whether it flows back to a remark you were making earlier, Ian about, actually, I think I was making on your behalf about How much you’re a proponent of UK PLC, if you like, and our representation on a global scale, and ultimately why this industry matters as well.

I wonder, are you seeing a bit of jurisdiction shopping? Are you concerned that people will be going, “Well actually, we’ll go offshore. We’ll go somewhere else.”

Ian: Yes. In a word, absolutely. We hear quite regularly from our members that are law firms that this jurisdiction shopping is taking place. It’s a fine balance by policy makers, and then the regulator that enforces the policy written by government here in the UK, to strike the right balance, to show that we have guardrails in place to protect against detrimental societal impacts such as money laundering, terrorism financing. Nobody in the crypto industry thinks this is a good thing, naturally.

So that is where the first piece of regulation has come through, to protect against illicit finance. But also we do see other potential issues where the new regimes don’t paint the UK in a positive light for direct overseas investment. Through our involvement with Her Majesty’s Treasury, we do a lot of outreach work with the Department of International Trade, where overseas companies that are in the crypto digital asset industry want to set up in the UK.

Most companies know that the UK is a good place to do business, has clarity around taxation, not in all areas of crypto assets. It’s easy to set up a company, and formation a company. We have a good rule of law, but we also have a sense of excellence when it comes to FinTech, financial technology. And so companies in the crypto blockchain space want to come to the UK and build, because we have access to great resource. However, we have this issue now, where the regulation and policy issues aren’t necessarily clear, and they’re fraught with a bit of friction that is perhaps putting off companies that want to build here, and may create hundreds if not thousands of jobs.

Julia: This leads me to my next question, which is, it’s always a very odd one that I ask guests who come on StreetsTalksTo which is around this very question of regulation. And particularly because I think the UK, as you say, is very well known to be a very good place to do business in, and the FCA are often applauded around the world for the clarity of their regulation as well. So I always ask people what their favourite piece of regulation is. It’s a bit of a weird one. Su could I come to you first of all? What’s your favourite piece?

Su: It’s a difficult one. I think in any other industry, we would have a huge amount to select from, but I think we’ve covered some of these topics already through the conversation that we’ve been having, that there isn’t necessarily enough regulation for us to be able to select and say, “That’s my favourite.”

I mean, we won’t exist as an association if we get to a point where all of the regulation is in place, I guess. And a lot of the work that we’re trying to do is to make sure that we can regulate better. But I suppose in short, I don’t think I have enough options to be able to say I have a favourite.

Julia: I have never had a guest who’s given me that answer before, but it is interesting. I suspect actually, as we go ahead, that there’s a very clear call for needing greater regulation, greater regulatory clarity. But also, I suspect, because this is a world that’s evolving at such pace, there’s always going to be a place for CryptoUK. I have a feeling that that’s going to be the case.

Ian, let me ask you the same question. I mean, as you are thinking about this world, obviously I suspect the answer’s probably similar in terms of not enough regulation at the moment, but what are you particularly thinking about?

Ian: Favourite regulation is probably around the balance proportion approach. That is what we advocate for here in the UK. As the industry matures, then naturally there’ll be a greater focus on protecting against consumer harms, for example, and advertising that is misleading and doesn’t talk about the risks and downsides. But it is a balance of giving clarity to companies to set up. And we got to remember, we touched on this before, that other jurisdictions, such as Europe – the UK is now not in Europe – do have some clarity around their direction to travel when it comes to regulating crypto.

So we have a chance in the UK to adopt a different approach. So I believe we have a chance in the UK to adopt a somewhat different approach to our friends in Brussels, which is to be more open for crypto business to come and set up and do business, but still getting that balance of protecting against consumer harms, but sending out a message to the globe that we are open for these businesses to come and build new innovative products and services.

Julia: Wonderful. Well listen, I hope everybody’s enjoying this conversation as much as I am, because it feels very much of its time. I think when we look at the discussions that are going to be playing out in 2022, clearly developments in the crypto and the digital asset industry are going to prevail, for sure.

This is StreetsTalksTo CryptoUK, and I’m joined by Ian Taylor, Executive Director and Su Carpenter, Head of Community Programs and Content. I would love to get your thoughts if you would, as we go into really the last section of the show, thinking about the road ahead.

As I say, 2022’s going to be a really critical year for the industry. It’s a very clear call for some proportionality and some equity around fair and balanced regulation, and appetite to engage. But also we’re going to see some clear trends coming through. I would love to ask you each, actually, what are you particularly thinking about as you look ahead? And then also, what advice you’re giving your members as you plan ahead as well? Su, can I come to you first of all?

Su: Absolutely. Looking ahead actually feels a lot more positive than some of the conversations that we’ve had so far, where I feel like we’ve just talked about some of the issues that we’re facing within the industry. What we’re actually really starting to see now is that we’re pushing against more of an open door when it comes to the policy makers and politicians.

We are doing some work in establishing an all party parliamentary group, and we’ve had some really good conversations with MPs who really do want to learn more about the crypto industry, and appreciate the fact that it isn’t going anywhere, and the best way for them to be able to support this, help advocate fair policy, is to actually understand more. So we’re having some really good conversations, and there’s a real appetite to actually learn within parliament.

One of the other things we are also starting to see a shift in is the institutional uptake and adoption of crypto assets, and digital assets as well. And it’s really great for us, because some of these bigger institutions are coming to us to actually start learning from some of the smaller organisations who have been more agile in that space, but also really to get our opinions and want to be a part of the community.

From our perspective, that’s great. We represent a really diverse range of members, but we’re starting to see that diversify even more, both in size and scale of the organisations that we’re working with. I think the future looks very bright for the crypto space in the UK.

Julia: It’s really interesting talking to both of you, because I’m getting this very clear sense of “all are welcome”. As you say, the richness and the tapestry of the community really, really matters, but it’s great to hear you say that some of those larger institutions are also engaging as well, and wonderful to hear about the APPG as well, the All Party Parliamentary Group, because those policy makers and politicians really, really matter.

Ian, your thoughts as you’re looking at the industry, as you look ahead to the year, what you’re paying attention to, what you advise your members. See us out with a sense of what really matters in the crypto industry this year.

Ian: What we do know is that the industry is very dynamic. It’s very innovative, and it’s very difficult to forecast what will come in a short horizon.

One thing we do know from our work we do closely with the FCA and Her Majesty’s Treasury, and now with members of parliament and the House of Lords, is that policy and regulation, guardrails, hopefully flexible and proportionate, are coming in the next year. Whether that be stablecoins, whether that be market surveillance or market integrity. We know that financial promotions will be regulated in 2022. We know that there will be other consultations around digital payments in the UK, central bank digital currencies. There’s a lot of work going on at the Bank of England.

We also know that adoption both in the retail side and the institutional side, as discussed previously, is increasing at a rate of knots, and not just to talk about Bitcoin as an alternative investment. We also see different types of crypto assets being used for the use cases that they were originally designed for. Countries that perhaps don’t have as secure a payment system or banking system as western countries, such as the UK, Europe and the US, Bitcoin, for example, is being used as it was originally designed for, as a peer-to-peer payment system that is completely trustless. One doesn’t need to rely on a central entity to make sure that that payment goes through. And this is revolutionary. That’s one of the really interesting use cases that got me excited about this industry.

Julia: The great thing talking about both of you is you get a real sense of not only your passion for the industry, but also the consideration that’s going around that, in terms of so many different aspects and angles, whether that’s industry engagement, collaboration, regulation, policy, but also real advocates for the future, and the potential, and the real use case of digital assets and digital currencies, but also why this matters for UK PLC.

It’s been wonderful to have you both on the show. Thank you so much for joining. I’m just going to tell everybody how they can find you. The website is cryptouk.io. You can find them on Twitter @CryptoUKAssoc, as in association, and LinkedIn CryptoUK as well. Ian, it’s been great to have your thoughts today. Thank you so much for joining us.

Ian: It’s been a pleasure. Thank you for the opportunity.

Julia: Wonderful. Su, thank you very much indeed for all your consideration.

Su: Thanks, Julia. It’s been great talking to you. And we’d just like to add one final thought. Anybody who’s interested in influencing the way that the crypto industry will go in the UK, please visit our website and come and join us. The more members we have on board, the stronger the voice.

Julia: There you are. I couldn’t have put it better myself. There we go. I hope you’ve enjoyed the conversation, StreetsTalksTo CryptoUK. And do tune in again for a further episode. I’m Julia Streets. Thanks for listening.

Kieron: This episode of StreetsTalksTo was produced by me, Kieron Yates, on behalf of Streets Consulting Limited. Streets Consulting is a business development, marketing, communications consultancy that’s focused on helping Fintechs from the smallest startup companies to some of the world’s largest global organisations. Everybody’s trying to innovate and everybody’s trying to grow. You can find this episode on Streetsconsulting.com and using the hashtag #StreetsTalksTo. We can be found on LinkedIn and on Twitter at @StreetsConsult. Thanks for listening.