First they ignore you, then they laugh at you, then they fight you, and then you win. That's the saying about political change. Over the past decade, the world of cryptocurrency, a digital system that works like money and is stored in a distributed ledger called the blockchain, has progressed through stages one through three. Now he's fast approaching his fourth: victory.
After initial misunderstanding, then just distrust, then active hostility, Western governments are getting closer and closer to the idea that they can coexist with cryptocurrencies. So much so that new laws and regulations around the world in the years to come promise to give the world of “digital assets” a chance to catch up with the financial services industry. Currently, the European Union, the United States and the United Kingdom are developing separate regulatory regimes. Which new laws are most useful and enforceable could determine the future home of the crypto world.
Which brings us to one of those hairpin moments that could cost London dearly like the big bang of financial deregulation in 1986.
The United States, which drove most of this technology, must be its natural home. Yet cryptocurrencies have recently become a political flashpoint between Democrats and Republicans, particularly in the wake of the FTX scandal and its many missteps. The Democrats took a hostile stance. And given the slow pace of SEC regulation, some have spoken of a “war on cryptocurrencies.” That means there's little chance of jumping to the other side, which is what Rishi Sunak (MBA, Stanford) wants to jump on. The Prime Minister hopes to replicate the actions of Silicon Circle, where London rose to prominence at the start of the 'fintech revolution' led by Monzo, Starling and Wise (formerly Transfer Wise). The prime minister is excited: he shares the same wealth-worshipping attitude as politicians around the world when it comes to building tech hubs, plus a little more self-interest, having worked at Goldman Sachs and various hedge funds. He recently held private talks with the Winklevoss twins (who may or may not have come up with the idea for Facebook by Mark Zuckerberg) about bringing cryptocurrency firm Gemini to London after it fell out with US regulators.
Sunak even went so far as to make a personal statement last month when US venture capital firm Andreessen Horowitz announced it was opening its first overseas office in London: a competitive business environment.
Marc Andreessen, co-founder of Andreessen Horowitz, is one of the most successful investors in the world. In 1995, Andreessen's Netscape was one of the first tech giants to take a $56m (£44m) pay cut. Twelve years later, he sells his next big project, OpsWare, for $1.6 billion. In 2009, he partnered with Ben Horowitz and successfully turned his $300 million venture capital fund into $2.7 billion with investments including Twitter, Airbnb, Skype and most recently cryptocurrency platform Coinbase.
By Christmas, Andreessen Horowitz, who calls himself "a16z," will have 200 employees tasked with investing in new internet and digital currency businesses. They will also bring well-known technology accelerators. Given the volatile regulatory environment in the US, there appear to be 20 or more companies looking to follow suit.
Others are less optimistic. In an opinion piece for Forbes Crypto, John Roberts, editor of New York Je, takes aim at the entire continent.
"Europe cannot innovate," he wrote. Yes, it's rude to say so, but in covering Silicon Valley as a tech reporter for more than a decade, I've seen firsthand that the place has a unique blend of culture, intelligence, and resources which cannot be reproduced. This is especially true in Europe, where the best-known company in the tech industry is Rocket Internet, whose fame lies in crushing ideas from Silicon Valley startups and adapting them to local markets. Meanwhile, the region's main technological export is bureaucracy, particularly the Byzantine bureaucracy. The GDPR data protection system, whose main achievement is the enrichment of Europeans and lawyers.
What is London? Is your cryptocurrency farm just your traditional financial services domain with some monkey code attached? And what can we offer potential investors in a world that is currently actively looking for a second city for a crypto nation? Is it realistic to think that we could go head-to-head with Silicon Valley? Or will Britain be overshadowed by a younger, hungrier eastern rival: Dubai or Singapore?
Finally, Sunak Goldman Sachs graduate Emmanuel Macron is trying with all his might to have Paris win the war. Paris has invested heavily in projects like Station F, "the world's largest tech incubator" with 1,000 startups on a single campus. In Switzerland, an hour from Zurich, Zug calls itself “Crypto Valley” and is home to 400 startups, making it the only city of 30,000 to have its own Ferrari dealership. Meanwhile, Portugal continues to hand out investor visas like confetti in Lisbon. In a decentralized enterprise, 300 days of sunshine a year can bring multiple benefits to global nomads.
By now London was deeply convinced of his strength. Lawyers, financial services companies, programmers and the supply industry that have long made this city a huge time zone. And he hopes that this will be accompanied by the right new law: not so strict, but also not so lax that the industry loses certainty and clarity.
"But [Roberts] might be right," said Gio Kendrick, head of crypto research at Standard Chartered Bank's London headquarters. "That's because it has reach and access to PhDs from West Coast universities." I would ask you to identify an important and innovative cryptocurrency success story in the UK. I'm not sure what qualifies. "A lot of [cryptocurrencies] and they're all from the United States... As far as funding goes, the access to capital that they have is in a different league."
Nathalie Oestmann is the main operator of Outlier, a web3 accelerator that works on many of the same principles as the more popular a16z version. In exchange for a percentage of the business, they fund and advise start-ups in this fledgling field. "We admit around 200 companies to the accelerator program every year."
Ostman is an American who has lived in London for the last 20 years. This is where the fintech boom began around 2015, which found its way into the blockchain world from there. He saw that London had started early. The UK is by far the leader in space technology, ahead of the US. And I think it's an opportunity again now that many fintechs are entering the Web3 space. It's a natural progression for us.
London is not the world of Silicon Valley. People are a little more careful, a little more cautious than adults. There is such a thing as a glowing bitcoin sibling pair. It's good when the industry takes this seriously.
Increasingly, there are also question marks about where top programming talent believe they can succeed. For years, San Francisco was the standard solution. But San Francisco isn't what it used to be. Problems that seemed difficult or difficult to solve five years ago, post-Covid, appear to be a function of what is sometimes referred to as Detroitification. These days, San Francisco is expensive and crime-ridden. Cities are often one or the other, and given the vast distances that must be traveled between the locations of major rigs like Meta and Apple, many have concluded that the gorgeous views of the bay just aren't worth it.
London is not spared from this trend either. In its own way, it's becoming too expensive and feels increasingly volatile. But Ostman didn't think the situation was comparable. “San Francisco is pretty empty right now and London is growing. I really don't see any slowdown. One has the feeling that the business profile of London will be very different. Many of them are veterans of the Canary Wharf world, as you can see.” for a second chapter three on “London has a lot of intellectual capital,” said Jamie Crowley, a reporter for crypto news site CoinDesk. "But this isn't the world of Silicon Valley." Be careful, it's a little big. There are a few aspects to bitcoin, bro. And I think that's a good thing if the financial sector takes this industry seriously.
Standard Chartered's Kendrick agrees, saying, "Five years ago, the bitcoin brother aspect might have been right." "His profile is relaxed now."
The UK is the leader in fintech by a wide margin, ahead of the US, and I think this is where the UK has another opportunity.
Kaitlin Argeaux is the co-founder of Crypto Mondays London, a meetup group dedicated to educating and empowering Londoners. It started in 2018: “The first meeting was just me and three men. Now the profile is very different. We have about forty percent women. And we have about a hundred men on Mondays.” He calls his regular audience “10 percent experts, 60 percent advanced and 30 percent beginners”.
"I really hope so," he said. I think this is just the beginning in many ways. At Web3, we make a conscious effort not to repeat Web2's mistakes. It's not meant to be a competitive environment, we want it to be more inclusive.
For the past few weeks, there has been talk of the end of crypto winter — the nine-month market crash that began with the FTX crash late last year. Bitcoin stopped hovering around $17,000 and eventually climbed above $30,000; The crypto spring is finally upon us. This makes the likes of Argeaux optimistic about a real breakthrough moment for the British scene. Experts advise you to block out the short-term noise (price fluctuations, strategic decisions) and focus on the big picture: growth itself. The blockchain is taking shape. For a long time just an attractive placeholder, it has gradually become a real industry in which products serve a purpose. There will definitely be individual winners and losers. It will be difficult to choose them. But the broader trendline is bound to rise.
That's a point that goes back to Kendrick. Comparing that to the tech world of the late '90s, I think Amazon made the list, and it did it in 1997. That wasn't 1993. It wasn't 2007, but it was a long time ago. The quarter winner is coming. To use Amazon's example, pets.com might still be waiting to explode. It's in this medium. But I think if we have regulation, that will be an important driver.
He points out that once you transfer a fraction of your pension funds into cryptocurrencies, crypto is no longer the domain of the Black Shirt Brigade in Shoreditch. Now he's wearing a suit and he's standing on Cannon Street at 8:15. Vape pen is turned off. Fedora is obsolete. It's legal, stop laughing.