Bitcoin, cryptocurrency and blockchain startups exploded onto the London financial technology scene over the last few years, but now, due to a combination of potentially tougher new regulation and the UK’s looming exit from the European Union, things could be about to take a turn for the worse for the fledgling bitcoin and crypto sector.
The U.K.’s prime minister, Boris Johnson, who has taken over from Theresa May after she spent two fruitless years trying to negotiate a Brexit deal with the E.U., has steered the country towards a feared so-called no-deal Brexit scenario, potentially causing chaos–though perhaps boosting the bitcoin price.
While Johnson has clashed with the U.K.’s parliament over the possibility of a no-deal Brexit, it remains on the table, fueling business uncertainty.
If the U.K. does eventually leave the E.U. trading bloc without a deal, financial technology companies would lose access to the bloc’s single market–while bitcoin and cryptocurrency startups may struggle to justify a London office without an easy route into Europe.
“The uncertainty around Brexit has already taken a major toll, particularly for non-U.K. companies doing business in the U.K.,” said Felix Shipkevich, a New York-based lawyer specializing in digital currency and financial technology.
Financial technology businesses have already been found to be moving from the U.K. to the E.U. in preparation for Brexit, according to report from capital markets think tank New Financial, out earlier this year.
“If fintech businesses in the U.K. can’t access international individuals working in areas such as machine learning, artificial intelligence and blockchain as easily after Brexit, this could cause a contraction in the sector because currently, up to a fifth of the skills used by the fintech sector in the U.K. have come from the EU,” Sarah Hall, senior fellow at the U.K. in a Changing Europe research group, told bitcoin and crypto trade news website, Cointelegraph.
Last month, the U.K.’s financial services watchdog warned potential investors that bitcoin and cryptocurrencies have “no intrinsic value,” with some taking the caution as a signal the country could be moving towards a bitcoin ban.
Just last week, the Bank of England governor Mark Carney, who has previously poured scorn on bitcoin and its crypto peers, said a global digital currency could replace the U.S. dollar as the world’s reserve currency–and likely directly compete with bitcoin and other major cryptocurrencies.
Meanwhile, one promising crypto startup has already run into difficulties, according to reports.
Nodal Labs, a blockchain-powered freelance marketplace, has missed payments to staff with a boardroom battle underway for control of the floundering crypto company, according to AltFi, an alternative finance and fintech news website.