From longer approval processes to the threat that they could lose access to the European market, it is sure that British blockchain startups are looking for contingency plans.
A brief summary: in 2016, the United Kingdom held a referendum to remain in the European Union (EU), with a majority of voters choosing to leave the economic blockade. Since then, the government has negotiated with E.U. officials on the terms of its exit – but the recent hurdles have raised the specter of a "no-deal Brexit" that could lead to economic turmoil and uncertainty.
It is that uncertainty that some blockchain startups sweat about their future prospects – at least in the coming months politicians will attempt to conclude an agreement.
"Brexit is an obstacle to everything in the short term," said Jamie McNaught, CEO and founder of Solidi Ltd, which is developing a blockchain-based payment platform that uses cryptocurrencies to facilitate money remittances.
He told CoinDesk:
"[It’s] because all the fintech regulatory experts and lawyers are busy with so many things at the time and would not be busy if the Brexit did not happen. difficult at this time. (Brexit) will be a medium and long term obstacle? This depends a lot on the success of the Brexit. "
The startup is one of the four blockchain companies that have been accepted by the Financial Conduct Authority (FCA) of the United Kingdom for a sandbox test normally six months to December 2017.
Until this month of July, Solidi was still subject to the regulatory test, as "the whole thing is supported by some of the requirements to become regulated "said McNaught.
What Solidi is waiting for is the approval of a money service license (MSB) by HM Revenue & Customs, the UK authority that reviews money compliance to recycling. Solids waited nine months to get approval for the MSB license, but the process previously took about five weeks and the startup is not the only company in this position according to the FCA, he said McNaught.
To other blockchain businesses that do not address this specific problem, the consequences of a "hard Brexit" have become a major concern.
Renat Khasanshyn, co-founder of Etherisc, a European company that offers a decentralized insurance protocol, expects that Brexit will create obstacles for users and developers of its protocol and thereby hinder the growth of customers. The company platform allows suppliers to build insurance products on top of an open-source infrastructure.
But if the negotiations around Brexit are wavering, cross-border market tests will be much more difficult and compliance costs for suppliers will increase, as Khasanshyn explained.
"Users of our protocol will be adversely affected by Brexit because they will have to comply with regulations in the UK and in the EU, which will probably go in different directions," Khasanshyn told CoinDesk. "And they will respect and pay for this compliance twice."
For the blockcap company based in London, Globacap, the biggest concern is likely to be the threat of loss of passport rights.
In its white book on Brexit, the British government proposed new trade agreements with the EU, suggesting that the United Kingdom and the economic bloc maintain the current agreements for trade in goods but not services.
According to the proposal, UK financial services companies such as banks, insurers and wealth managers risk losing their passport rights – which grant them unrestricted access to other EU markets – when the United Kingdom will officially come out of the block next year
Myles Milston, CEO and founder of Globacap, explained that "normally, once [we] becomes a fully licensed securities company, we obtain the passport [rights] in rest of the EU countries. "
" However, obviously with Brexit, we could no longer obtain that passport, "he continued. "So it does not affect the sandbox test, but it could affect our business model after the sandbox."
Unless an agreement is concluded to extend market access – at least for a transitional period – these companies will have to pay to open new operational bases in the EU or face a serious loss of access to the market.
Blockchain companies that provide payment or electronic money services, therefore, anticipate unfavorable impacts on their activities, with a number of companies wishing to set up separate subsidiaries of the EU to avoid being completely blocked by the market .
Globacap is another project that participates in the FCA sandbox, where he is working on the issue of debt securities and stock on blockchain in the supervision of FCA.
As soon as the project passes the test and is fully launched as a company, it plans to open an office in Europe and request regulatory approval to avoid losing its passport rights, Milston said. [1 9659002] "At the moment we are deciding which is the best place in Europe to start," he added.
Nivaura, a UK-based fintech company that builds an issuance and administration platform for securities, including tokenized securities, says
"The passport now takes about three months and we can go anywhere," said Avtar Sehra, CEO and chief product architect of Nivaura. "But if we have to go to Germany and create a completely new business, it's a whole process of approval, it could take us a year to 18 months."
Not all doubts and gloom
Part, not everyone who spoke to CoinDesk about the potential impact of Brexit has a negative view of the situation.
Richard Cohen, a lawyer based in the UK at the Allen & Overy international law firm, argued that Brexit would have had little effect on the entire blockchain industry as a whole – in fact it considers it a positive potential for the country in terms of approach to fintech.
"The UK will be allowed to develop a regulatory framework that is much more favorable to fintech companies and to become a friendly jurisdiction where banks can make the most of blockchain and global opportunities," Cohen said.
Alastair Johnson, CEO of Nuggets, an e-commerce platform and payment ID, also received a very positive note, telling CoinDesk that his company has found the British government a support partner.
And his actions to date – particularly through the FCA, which tried to include blockchain and registry startup distributed within its cohorts sandbox, confirms this assertion
"The United Kingdom is very in favor of the potential for innovation in fintech and technology as a whole, "Johnson said. "And I think they will also see it as an opportunity to create markets, to continue growth and to associate with Europe and the world as a whole, and that's what drives support."
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