According to Nikolay Denisenko, the co-founder and CTO of the financial and earning application Brighty App, the digital version of the pound sterling can be a bridge that enables “easy conversions between different types of crypto, stablecoins, and digital currencies.” Furthermore, the digital pound — also known as britcoin — can potentially “make payments faster, more secure, and less expensive.”
The Digital Pound’s Benefits Versus Its Vulnerabilities
Nikolay Denisenko, a Revolut alumnus, nevertheless warned that britcoin just like any other central bank digital currency (CBDC) may be susceptible to cyberattacks. He also highlighted the public’s concerns over the digital pound project’s rumoured cost of $1.31 billion versus the benefits which the CBDC is expected to bring.
Meanwhile, when asked about the probability of the U.S. Securities and Exchange Commission (SEC) approving asset management giant Blackrock’s Bitcoin exchange-traded funds (ETF), Denisenko highlighted Blackrock CEO Larry Fink’s profile and influence as one of the reasons why many players in the crypto space are optimistic. The CTO also argued that when Blackrock and other asset managers’ Bitcoin ETFs are approved, this could result in a “lasting impact on the overall reputation of certain cryptocurrencies and digital assets.”
Also, in his answers to questions sent to him via Linkedin, the Brighty App co-founder also shared his thoughts on what he thinks about Blackrock and other asset managers’ choice of Coinbase as their surveillance-sharing partner. He also detailed some of the things fintech startups and residents in the U.K. need to consider now that the crypto and stablecoin rules have received royal assent.
Below are Denisenko’s written responses to the questions sent.
Bitcoin.com News (BCN): Do you see the United Kingdom as one of the places that will benefit from the United States’ crackdown on crypto — the so-called Operation Chokepoint 2.0?
Nikolay Denisenko (ND): I don’t want to raise any of the conspiracy theories we’ve heard recently about Operation Chokepoint. It’s still too early to know exactly how the U.S. crackdown on cryptocurrencies will turn out. In the U.K., we’ve already seen some big crypto companies rise and the government actively teaching people about the risks of crypto investments. This fact shows that the U.K. is trying to encourage innovation in finance while also protecting consumers and preventing financial crimes.
The vision of the U.K. government is to have an advanced financial system that supports sustainable and open financial services. They’re trying to create a good environment for crypto businesses and investors without stopping innovation. That’s why the U.K. could be a good place for people who want to explore opportunities in the crypto world.
As the U.S. is making its regulations stricter, some crypto companies and investors might look for other countries to work in. The U.K. has a growing crypto community, and the government supports that: a fact that could be attractive to talented people, investments, and businesses globally.
But it’s important to know that we can’t be certain about the impact of the U.S. crackdown and how the U.K. will respond. It could change over time. The U.K.’s success in benefiting from these changes will depend on having good regulations, government support, and bringing in and keeping talented people and investments in the long term.
BCN: In your opinion, how does the adoption of the digital pound change payment habits?
ND: It depends on many factors, but if the digital pound becomes widely used, it could bring about some significant changes in how we make payments.
First, it would connect different digital currencies. The digital pound can bridge various forms of digital money, allowing easy conversions between different types of crypto, stablecoins, and digital currencies, which would make using and exchanging different digital assets much simpler and more convenient.
Second, one of the most exciting possibilities of the digital pound is that it could revolutionize cross-border payments. Instead of relying on traditional systems like the Society for Worldwide Interbank Financial Telecommunication (SWIFT), using the digital pound for international transactions could make payments faster, more secure, and less expensive. It would be a major improvement for anyone sending or receiving money across borders.
And third, It might gradually reduce the reliance on the U.S. dollar and give the British pound a stronger position. This shift could have implications for global finance and trade.
BCN: Why does Britcoin face criticism?
ND: Everything is pretty straightforward here and revolves around privacy, security, cost, and adoption concerns.
As Britcoin is a centralized currency, the Bank of England would have full control over it, including transaction tracking. This raises serious privacy concerns. Further, digital currencies are vulnerable to cyberattacks. If Britcoin were to be hacked, it could have a significant impact on the U.K. economy.
In terms of costs, the Bank of England estimated that it would cost $1.31 billion (£1 billion) to develop and implement Britcoin. Some people believe that this is too expensive, especially given the potential risks involved — which could also affect adoption, where it is not clear how many people would actually use Britcoin. Some people believe that it is too similar to existing digital currencies, such as Bitcoin, and that it will not be widely adopted.
BCN: After the UK’s crypto and stablecoin rules received royal assent, what do crypto fintechs and customers now need to consider?
ND: The royal assent on the U.K.’s crypto and stablecoin rules marks a significant regulatory shift for the crypto industry, impacting both crypto fintech firms and their customers.
First and foremost, the new rules assist in a comprehensive regulatory landscape extending beyond just stablecoins. Therefore, fintech firms must ensure that they are completely compliant with these laws. There would be tighter controls on crypto asset promotions, implying that companies may need to reassess their marketing approaches to adhere to the law. Any communication that could qualify as a financial promotion must maintain certain criteria. Finally, Fintech companies outside the U.K. must register with the Financial Conduct Authority (FCA).
On the customer side, there are a few key things to consider. Although the regulation of crypto assets is aimed at consumer protection, it also underscores the inherent risks associated with such investments. Customers must fully grasp these risks before committing to their capital. Before engaging with a crypto asset provider, customers would be looking to confirm whether the provider is FCA registered, as it provides an extra layer of protection.
While these regulatory changes bring new challenges for fintechs and their customers, they also open up opportunities.
BCN: How do you feel about the U.K. fintech ecosystem and the current position of Revolut in it?
ND: Regarding the current position of Revolut, it is difficult to give an unbiased assessment of the situation. I myself used to work for Revolut, and I know many of the people there. I know that the individuals who work at Revolut are very dedicated and driven.
I think that the U.K. tech ecosystem can be characterized by innovation, being future-oriented, and being full of “people who are really motivated.”
Revolut’s position in the U.K. tech ecosystem has been one of significant growth and ambition. They have attracted millions of customers and expanded their product offerings rapidly. Their pursuit of a banking license shows their desire to expand further. However, this rapid growth has also brought challenges. One key challenge for Revolut seems to be aligning its operational capabilities with its remarkable growth.
If Revolut’s application for a banking license is rejected again, it would likely impact its current expansion strategy. They may need to reevaluate their business model or explore alternative avenues for growth.
This situation serves as a reminder to the fintech sector about the importance of sound financial controls and regulatory compliance. While rapid growth is desirable, it should not come at the expense of accounting accuracy and adherence to regulations. To that end, Brighty App entered the U.K. market, offering GBP payments and transfers via Faster Payment System (FPS). Funds in GBP are already available to thousands of British customers of Brighty App, which should offer more stability than some of its competitors.”
Revolut, on the other hand, could view it as an opportunity to address operational weaknesses, strengthen accounting practices, and enhance its compliance frameworks. By taking corrective measures, they can overcome the challenges they face and continue to grow and innovate in the U.K. tech ecosystem.
BCN: While the crypto industry has had a rough year so far, there is a growing feeling that the approval of Blackrock and others’ Bitcoin exchange-traded funds (ETFs) will set the tone for a better ending to 2023. In your opinion, how much of a factor are the ETFs, and do you foresee the Gary Gensler-led U.S. Securities and Exchange Commission (SEC) actually approving these?
ND: While it is still not 100% certain that the SEC will approve those ETFs, it seems highly likely that this will happen. The final state of the approved ETFs will most likely include a set of features that essentially turn cryptocurrencies (or other digital assets) into “big investment firm commodities,” meaning that whatever the final ETF product will look like, it won’t have much to do with defi.
These ETFs are a big factor… and the involvement of Blackrock — the world’s largest asset manager by far — is an even bigger factor.
I remember that an acquaintance of mine who worked in the “traditional” asset management industry once said that there is this story among industry veterans. It says that the only person in the world who can get an ad-hoc appointment with any head of state or head of government is Larry Fink, the CEO of Blackrock.
I also think that it is enough to look at Fink’s CEO letters that he writes every year or his wholehearted endorsement of environmental, social, and governance (ESG) ratings. No matter the overall industry sentiment, when the CEO of Blackrock says something, the industry and the economy as a whole listen. (That includes the people who regulate and supervise the industry.)
If big asset management corporations like Blackrock, Fidelity, and Wisdom Tree push for a Bitcoin ETF, they will eventually get it and have a lasting impact on the overall reputation of certain cryptocurrencies and digital assets.
BCN: Most (if not all) giant asset managers have selected Coinbase as their surveillance-sharing partner. What does that say about decentralization?
ND: While it is still too early to tell how this will impact the industry in the long run, this is obviously not something that furthers decentralization.
What you have is the world’s largest ‘centralizers’ of assets working together with a centralized exchange like Coinbase to capitalize on the increasing value of cryptocurrencies, specifically Bitcoin. This is obviously not done to support the original idea of decentralized financial applications and the real and actual democratization of cryptocurrencies or digital assets.
While the selection of Coinbase may raise questions about decentralization, it’s essential to remember that the adoption and evolution of cryptocurrencies and blockchain technology are still progressing. The industry continues to explore and develop solutions that align with the decentralized ethos while addressing regulatory requirements and operational needs.
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