The Bank of England is launching a ‘fintech hub’ to support the development of technology for financial services, as it hints at changes to come.
Speaking at HM Treasury’s international fintech conference in London on 22 March, the bank’s deputy governor for markets and banking, Dave Ramsden, said finance had yet to see a big turning point in the way it uses technology to provide services.
He likened the change ahead to the way taxi company Uber revolutionised the cab market.
Mr Ramsden said the bank did not believe new age currency concepts such as bitcoin had the potential to overhaul finance, but that he saw potential in the underlying technology used.
He said: “We judge that crypto-assets themselves may have limited utility, particularly as money. 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 recognise the opportunities in the technologies that underpin crypto-assets.
“The distributed ledger and cryptographic technologies used by crypto-assets have the future potential to deliver benefits both to the financial system and to the economy it serves, including increasing efficiency and resilience and contributing to a more distributed and diverse payments system.”
But adapting these technologies for the demands of the financial system posed significant challenges, he said.
Focusing on performance and privacy, as many developments currently do, was not enough and had the potential to disrupt resilience, he added.
Mr Ramsden said the Bank of England was intent on being open minded, keeping an open door, and being open to change.
He said: “The defining trend of the last ten years has been the weakness of productivity.
“Given the size of the financial sector in the UK, I can see fintech driving competition and a pick-up in productivity in the medium term.”
He welcomed the government’s fintech sector strategy, including the announcement of a Treasury/FCA/Bank of England taskforce, which will explore further the risks of crypto-assets and the potential benefits.
He said: “Today I can announce that we have set up a new fintech hub that will sit at the heart of the Bank, to consider both how the Bank understands and how it applies fintech, relevant to its mission.
“The Hub will be a central point of contact for the fintech sector to engage with the Bank, and will play an active role in the new HMT/FCA/Bank taskforce.
“And it will engage with you to understand and apply these developments to support the next wave of innovation in finance, and ensure that the UK has the right infrastructure to support that into the future.”