Bank of England Announces New Fintech Hub

The hub will allow the bank to more easily engage with the fintech industry, promote greater understanding of emerging technologies and play an active role in the UK Government’s recently-formed crypto-asset taskforce, comprising some of the industry’s leading institutions. 

Dave Ramsden, deputy governor for markets and banking at the BoE made the announcement in a speech delivered during HM Treasury’s fintech conference on March 22, but published on March 26.

“Investment in the UK’s financial technology is going to be an important factor in sustaining the UK’s global position. With its open approach of considering, adapting to, and applying fintech across the breadth of its mission, including through its own investments, the Bank will play its part,” he said.

Over the past two years BoE’s accelerator program has actively worked with the fintech industry in experimenting with new technologies, along with conducting proof-of-concepts in areas such as blockchain, regtech, machine learning and cybersecurity. This work has helped to introduce a more open-minded approach to running the bank itself, as an infrastructure provider, as a payment systems operator and a regulator, Ramsden said.

This latest step in forming a fintech hub mirrors that approach in embracing new technologies, promoting change and playing its part in supporting the UK’s wider fintech movement, he said.

In addition to its work on emerging technologies, the BoE is also looking at ways of improving regulation using fintech, by both building on existing work and collaborating with the Financial Conduct Authority (FCA). Its latest work looks at the advantages of machine-readable technology and how that could be developed to assess data and assist regulation.

The BoE has also examined the use of cryptocurrencies, but found their use to be limited at present, Ramsden said.

“We judge that crypto-assets themselves may have limited utility, particularly as money,” he said. “They are too volatile to be a store of value, and with high transaction costs and slow settlement times, they are an inefficient medium of exchange. However, we also recognize the opportunities in the technologies that underpin crypto-assets.”

Given the focus on regulation surrounding crypto assets and currencies, Ian Webster, senior managing director of Axioma, a risk management vendor, believes that the UK’s regulatory apparatus is starting to catch up with the rapidly developing fintech industry in this area, through these initiatives.

As the likes of digital currencies become more mainstream, he says, there is a need for a more sophisticated approach to dealing with the notoriously volatile crypto markets, and that a lot of work has yet to be done.

 “It is still and very, very naïve market, and for it to develop, it will need much more of an infrastructure available for people to understand what is actually going on in that market,” he says

Benedict Nielson, the co-founder of Finbourne, the investment technology firm, welcomed latest BoE initiative in promoting new technologies and fintech partnerships.

“At its heart, the fintech sector is focused on using new technologies and agile business methodologies to solve systemically important problems,” says Nielson. “As the key part of the financial infrastructure, it’s great to see the BoE taking its natural lead and encouraging fintech and the wider financial services sector to work more closely, quickly and equally in partnership together.”