Those travelling on the London Underground recently will not have missed the advertising campaign mounted on the network by Coinbase, the cryptocurrency exchange. They will, though, need to visit YouTube to watch the TV commercial supposed to have led it.
That is because the two-minute slot, an Oliver!-style song and dance routine portraying a litter and rat-plagued Britain with runaway inflation and sacked office workers becoming takeaway delivery drivers, did not comply with the UK code of broadcast advertising.
This was not because of the political content in the advert, approvingly circulated by Nigel Farage, but because Clearcast, the organisation that approves most British TV adverts, felt it showed cryptocurrency as a potential solution to economic challenges without providing evidence, and that it did not highlight risks associated with the assets.
The ad, which concludes with the line “If everything’s fine, don’t change anything”, was aimed at sparking a debate on whether the financial system works for many ordinary Britons.
The row over it goes to the heart of another argument currently raging among policymakers, which concerns the approach the UK should adopt towards stablecoins: blockchain-based digital currencies designed to maintain a stable value by being pegged to a specific asset, like the US dollar, with which they can in theory be exchanged.
As Mehreen Khan wrote here three weeks ago, several central banks, including the Bank of England, are uneasy about stablecoins. The governor Andrew Bailey warned last month against commercial banks launching their own stablecoins and argued such assets could not be “a substitute for commercial bank money”.
It feels, though, as if he is swimming against the tide. Momentum behind stablecoins has accelerated since the US Congress last month passed legislation — the Genius (Guiding and Establishing National Innovation for US Stablecoins) Act — which created America’s first comprehensive regulatory framework for stablecoins.
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To take a few headlines from the last fortnight: a Japanese start-up called JPYC has won regulatory approval to issue the first stablecoin pegged to the yen this autumn; the Financial Times reported that the EU is accelerating plans for a digital euro; and Reuters reported that China — which banned cryptocurrency trading and mining as long ago as 2021 — is considering allowing the use of yuan-backed stablecoins for the first time in order to boost wider global adoption of its currency.
Meanwhile Circle Internet, issuer of the world’s second-largest stablecoin USDC and which was valued at $8.1 billion when it came to market in June, reported better-than-expected results in its first trading update since listing; and Bullish, the crypto exchange backed by the PayPal and Palantir co-founder Peter Thiel, saw its shares triple in value on its stock market debut — during which it received $1.15 billion in proceeds in stablecoins.
Goldman Sachs summed up the mood last week with a note in which its analysts proclaimed: “It’s been the summer of stablecoins.”
They suggested the global stablecoin market, currently sitting at around $270 billion, could expand into the trillions of dollars in the coming years, with inflows coming from money market funds, bank deposits and physical cash. With most stablecoins in circulation currently pegged to the dollar, foreign demand for the greenback is also expected to drive money into the asset class.
All of this brings the debate over whether UK regulators and policymakers should formulate an approach to stablecoin into sharp relief — particularly when even the EU, not noted for its speed in these matters, appears to be getting its act together.
Late last week, 30 crypto industry figures, including executives from firms such as Coinbase — on whose advisory board the former chancellor George Osborne sits — and Copper, chaired by Osborne’s successor Philip Hammond, sent an open letter to Rachel Reeves, the current incumbent at No 11.
In it, they urged adoption of a “pro-active, co-ordinated national strategy … that positions stablecoins not as a risk to be contained, but as a financial infrastructure to be responsibly embraced”.
The Treasury has said the government plans final legislation on crypto assets, including stablecoins, before the end of the year.
The irony is that Britain does have start-ups capable of establishing leadership in this field. One such is London-based Noah, founded by the former Visa and Adyen executives Shah Ramezani and Thijn Lamers, whose infrastructure technology seeks to unite traditional and digital systems and allow customers to accept local currencies and convert them into stablecoins in real time.
The company, which recently raised $22 million from venture capital backers including LocalGlobe, is rapidly securing partnerships and customers in the United States, Africa and Latin America but, for now, is unable to build a business in its home market.
Ramezani said: “We’re bullish about the UK and excited to see what reforms are brought forward. But we also see that other nations are moving very fast to attract high-growth fintechs and the UK needs to understand that the best regulation drives, not stifles, growth.”
There are concerns that the delay in formulating a strategy may hurt the wider fintech sector, where there is already a mini-crisis of confidence following the recent decision of Wise, the payments pioneer, to move its primary stock market listing from London to New York and news that GoCardless, another payments fintech that was thought to be close to a London stock market listing, may now instead sell itself to a Dutch competitor.
With Reeves thought to be more enthusiastic about stablecoin than the governor, comparisons are also being drawn with how the Bank’s Prudential Regulation Authority — to the chancellor’s frustration — was taking its time over awarding a full UK banking licence to Revolut.
One industry source says: “Revolut is a global industry champion and yet look how they treat it. It doesn’t make us very confident. If the US had a company like that, which was flying, they would get behind it. Here, it feels like a fight.”
Fintech has been one of the UK economy’s fastest growing sectors over the last decade. It would be a huge shame were that momentum to be lost.
Ian King is a former Business & City Editor of The Times