The UK’s Financial Conduct Authority said that several groups in its preapproval stage are developing consumer-facing and compliance products that use blockchain technology.
Blockchain’s attraction for banks is it provides a unique shared database across multiple locations as an immutable public ledger of transactions, offering the potential to cut costs and speed up areas such as settlement of securities trades.
However, some regulators have been wary of the technology, warning of its potential vulnerability to fraud or to undermining financial stability.
The companies in question are being scrutinised as part of the FCA’s so-called Project Innovate. This offers advice to companies to develop products on what regulations they need to adhere to. In its first year, the project assessed 177 companies and approved 40 of them.
It includes a so-called regulatory sandbox, where companies can test products with temporary FCA authorisation.If a company wants to start lending or undertake any kind of payment services in the UK it would need FCA approval. If the FCA did give its imprimatur the companies would be among the first in the world to gain regulatory approval.
The UK government has stressed the need for new companies to challenge incumbents, particularly in financial services, and policymakers and regulators have followed suit. The UK is seen by the industry as having the most fintech-friendly regime worldwide, according to a global survey by consultants EY.
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