The full-scale implications of Brexit are unclear for a number of industries, including the FinTech industry. Dr. Joanna Perkins of the Financial Markets Law Committee (FMLC) outlined six key areas of Brexit impact:
- Policy divergence – although the United Kingdom (UK) will have less interference in its affairs, UK approaches will remain just that – UK approaches. The United Kingdom (UK) will have little-to-no influence over continental developments in emerging areas of FinTech like cryptocurrency. Furthermore, the UK faces the prospect of having to “domesticate any regime which is developed and implemented in Europe”.
- Heightened uncertainty – questions regarding FinTech-impacting legislation already added uncertainty to the industry. Brexit only serves to increase this, especially as the UK begins to uncouple itself from European Union (EU) legislation.
- Regulatory collaboration – a lot of models for financial services regulation in the EU depend on establishing regulatory colleges, which in turn rely heavily on seamless international collaboration. Brexit will do little to stem this; it will only serve to put the UK out of step with an increasingly frictionless Europe.
- Authorization – many FinTech providers are also providers of established financial services, which clearly fall within the regulatory perimeter and require authorization for doing business in the EU. Gaining EU authorization, however, is by no means a simple process, and a lengthy wait could prove fatal for smaller businesses and startups as well as be a major inconvenience for the larger ones.
- Data protection – cloud storage and data protection are also complicated issues. There needs to be a smooth transition of personal data between jurisdictions for both commercial and regulatory reasons, otherwise a lot of activity will grind to a halt. It also remains unclear if the UK and EU will trust one another’s data protection schemes in the future.
- Gibraltar – Gibraltar finds itself integral to Brexit negotiations both as a British overseas territory and as a hotspot for FinTech innovation, specifically with regards to its relaxed stance on distributed ledger technologies and cryptocurrency trading.