UK Blockchain Projects Explore Alternative Options as No-Deal Brexit Nears
UK Blockchain Startups Looking at Options as Brexit Nears
Blockchain startups in the United Kingdom had it good – at least, until Brexit. With Brexit impeding, companies might lose access to the European market and as a result, they are looking for a backup plan.
For those who may need a recap, Brexit became a concern in 2016 when the UK held a referendum to determine whether it should remain a part of the European Union. The majority of voters opted to leave the economic block. Since the referendum vote, the UK has been discussing with Europe the terms of Brexit; however, several points of contention have led to “no-deal Brexit,” which leads to more uncertainty.
The uncertainty has caused some blockchain startups to become concerned about their future, especially when it comes to expanding into Europe free from issues. According to Jamie McNaught, the CEO and founder of Solidi Ltd., a platform developing a blockchain-based payment platform that uses cryptocurrencies for money remittances:
Brexit is a hinderance to everything in the short term because all fintech regulation experts and lawyers are busy with so many things at the moment. They wouldn’t be busy if the Brexit hasn’t happened. In terms of just getting time with people is difficult at this moment. Will it (Brexit) be a hinderance in the mind-and-long term? That really depends on how successful Brexit will be.
McNaught’s startup was one of four blockchain companies accepted by the U.K.’s financial Conduct Authority (FCA) for a six month long sandbox test in December 2017. As of July, the company was still going through the regulatory test. As McNaught pointed out, “the whole thing is being held up by some of the requirements as to become regulated.”
As Solidi awaits approval of its money-service business license from HM Revenue and Customs, it can at least go forward concerning its MSB License. Blockchain businesses that do not face the same issues may still be concerned about the Brexit and its impact upon their growth.
Renat Khasanshyn, co-founder of Etherisic, is concerned that Brexit will generate hurdles for its users and developers of its protocol and thus, client growth will be hindered as well. The company is geared toward allowing providers to build insurance products on top of an open-source infrastructure. Brexit will essentially make cross-border testing much more difficult and compliance costs may rise as well. As he stated,
“The users of our protocol will be impacted by Brexit negatively because they will need to comply with regulations in the U.K. and the EU, which will likely go in different directions. And they will comply and pay for this compliance twice.”
Another blockchain startup, Globacap, is concerned about the threat of losing passporting rights. The platform released a whitepaper about Brexit, in which it discusses the benefits of the U.K. and the EU maintaining an economic block to trade goods, but not services. The proposal suggests that British financial service companies, such as banks, insurers, and asset managers risk losing their passporting rights, thereby eliminating access to the EU markets. According to Miles Milston, the platform’s founder and CEO,
“Normally, once [we] become a fully authorized securities firm, we get passporting into the rest of the countries in the EU. However, obviously with Brexit, we might not get passporting right anymore. So it doesn’t actually affect the sanbox test, but it might affect our business model after the sandbox.”
If access to the EU does become constricted, companies interested in venturing into the EU will need to pay to open new bases of operation there, or they’ll face losing access. Globacap is looking to open an office in Europe and apply for regulatory clearance, thereby ensuring that it will not lose its passporting rights. As Milston explained, “At the moment, we are deciding where the best place is in Europe to start that.”
Nivaura, a U.K. based fintech company, is looking to open an office in Germany. The platform’s CEO, Avtar Sehra, stated, “The passporting now takes about three months, and we can go anywhere. But if we have to go into Germany and set up a whole new business there, there is a whole approval process. It could take form a year up to 18 months.”
Not all believe that Brexit will have a negative impact. Richard Cohen, an attorney at a U.K.-based firm, stated that Brexit would have little effect on the blockchain industry as a whole. Rather, he believes that it will be positive for the country. As he mentioned,
“The U.K. will be allowed to come up with a regulatory framework that is much more favorable to fintech companies and become a friendly jurisdiction in which banks can make the best use of blockchain and global opportunities.”
Alastair Johnson, the CEO of Nuggets, an e-commerce and payment ID platform, also has a positive view, stating,
“The U.K. is very supportive at the potential of innovation in fintech and technology as a whole. And I think they will also see that as an opportunity to create markets, continue growth and associate with Europe and the world as a whole. It’s everything that [is] driving the support.”