On Friday the 9th December, Chancellor of the Exchequer Jeremy Hunt unveiled the ‘Edinburgh Reforms’ of UK financial services – over 30 regulatory reforms to unlock investment and turbocharge growth in towns and cities across the UK. The Chancellor positioned these reforms as the next step in a plan kicked off by the previous Chancellor (now PM)’s Mansion House speech in July last year when Rishi Sunak set out a vision for the future of financial services in this country and around the world.

As part of that speech the then Chancellor spoke of putting “the UK at the forefront of technology and innovation in the 21st century,” by “taking forward recommendations in Ron Kalifa’s review of UK fintech, exploring the case for a central bank digital currency with the Bank of England, consulting on pioneering reforms to support the safe adoption of cryptoassets and stablecoins, and watching closely the key debates in finance and tech, like the opportunities of distributed ledger technology in capital markets.”

Our current Chancellor built upon these commitments, and others already placed before Parliament in the form of the Financial Services and Markets Bill (FSM Bill) again promising to “harness the benefits of emerging technologies”. The reforms include a commitment to “shortly” publish a consultation on proposals to establish a UK central bank digital currency (CBDC).

I am a determined advocate for the potential of emerging technologies in financial services and was a founder member of the All-Party Parliamentary Group on Fintech and published a paper on Distributed Ledger Technology for the Public Good in 2017. In response to the Edinburgh Reforms, I have three key questions:

1. Are we making the most of the technological opportunity?
2. Are we moving at the requisite pace?
3. Are we making the most of the brilliant community we have in the UK – are you – Finextra readers getting involved in the many and varied consultations just announced?

As well as the CBDC consultation already mentioned the full list of measures include various initiatives that should have an impact on technological advances in this space. In particular:

• Implementing a Financial Market Infrastructure Sandbox in 2023 – this will be included in the FSM Bill.
• Also in the FSM Bill, legislating to establish a safe regulatory environment for stablecoins – which may be used for payments – and ensure the government has the necessary powers to bring a broader range of investment-related cryptoasset activities into UK regulation.
• Publishing a draft Statutory Instrument to demonstrate how the new powers being taken forward in the FSM Bill will be used to ensure that the FCA has sufficient rulemaking powers over its retained EU payments legislation.
• Establishing an Accelerated Settlement Taskforce to explore the potential of faster settlement of financial trades in the UK. Reducing settlement times from the current industry standard of two days could reduce counterparty risk and increase operational efficiency. It is likely that DLT would play a role here.
• Publishing a response to the consultation on expanding the Investment Manager Exemption to include cryptoassets, which will facilitate their inclusion in the portfolios of overseas funds managed in the UK. This change to be made through HMRC regulations this year.
• Working with the regulators and market participants to trial a new class of wholesale market venue which would operate on an intermittent trading basis. This would be a global first and has the potential to act as a bridge between public and private markets and boost the UK as a destination for companies looking for investment.

I have written before about the FCA’s sandbox approach being one that we should be proud of. The success of the FCA’s regulatory sandbox for fintechs has been rightly replicated in over 50 jurisdictions around the world – and I have argued that the same sense of reasoned, rational positivity and optimism must be applied to crypto regulation. I am delighted to see the UK Government committing to a Financial Market Infrastructure Sandbox in 2023.

I am also pleased to see the launch (also on Dec 9th) of the Accelerated Settlement Taskforce. Chaired by Charlie Geffen the industry taskforce will examine the case for trades to be settled more quickly in the UK, such as moving to a ‘T+1’ standard settlement period. Initial findings will be published by December 2023 and details of how to get in touch to offer feedback or raise any issues with the taskforce are here.

Other reforms I was pleased to welcome were those relating to sustainable finance. The government has committed to publishing an updated Green Finance Strategy in “early 2023” and will consult in Q1 2023 on bringing Environmental, Social and Governance (ESG) ratings providers into the regulatory perimeter. HM Treasury will also join the industry-led ESG Data and Ratings Code of Conduct Working Group, recently convened by the FCA, as an observer. These services are increasingly a component of investment decisions, and the government reports that they want to “ensure improved transparency and good market conduct”.

If we are to ensure the UK is the world’s premier financial centre for sustainable finance then we need to push forward on this agenda, we need to unlock the private financing needed for Net Zero and we need to do much more on regulation and standards. I look forward to the Green Finance Strategy - as I have argued most recently at Finextra’s Sustainable Finance Live, ESG must be considered existential, seismic, and global. Our actions must be proportionate to the scale of the challenge.

The financial services sector is vital for Britain’s economic strength, contributing £216 billion a year to the UK economy. This includes £76 billion in tax revenue while employing over 2.3 million people. It is right that the Chancellor, with these reforms, has identified financial services as a key growth area.

There is an unrivalled opportunity for the UK to lead, but we need a principles-based, outcome-focused approach to regulation. We need to move at pace and we need your help. I will be actively involved in the FSM Bill when it comes before us in the House of Lords in January (second reading debate is 10th January) and I invite you to connect with me – and with all the government consultations and processes outlined above. We have an incredible opportunity to influence the future finance, and there is a role for all of us.