A new report, by the prestigious consultancy firm Ernst & Young, found London to be the best suited environment for Fintech with California a close second.
The report analyzed seven regions, including UK, California, New York, Germany, Singapore, Hong Kong and Australia, across four different criteria – talent, capital, policy and demand. It found California to be first for both talent and demand, but with a policy environment second to last, while New York has the highest demand the report says, but the worst policy environment.
UK was ranked second on talent, third on capital and demand after New York and California, but first on policy thanks to a number of new initiatives by the current conservative government which has implemented tax reliefs and a forward looking approach to regulations that affect the Fintech sector.
Specifically, Britain is the only English speaking region in the world which classifies digital currencies, such as bitcoin, as any other currency for tax purposes, unlike USA, Australia, or Canada’s classification of digital currencies as a commodity, subject to double taxation and a generally unfavorable tax treatment.
“The UK is what you get if you take the best of other regions like Silicon Valley and New York.” – the report says.
The close proximity of the financial sector to the tech sector in London, with the Silicon Roundabout in Shoreditch at a walking distance from the square mile, has made it a favorite with many digital currency and blockchain related companies, such as R3ECV, Blockchain.info and Bitstamp.
But London faces competition from growing Fintech hubs such as China where, according to the report, VC capital is second to only California. Another growing hub is Switzerland, where companies like Xapo and Ethereum are based due to what they perceive as a favorable regulatory environment.
The report concludes in a comparative snapshot that Britain is “an all rounder,” California is “established and efficient,” New York has “proximity to expertise and customers,” Germany is “large but complex,” Hong Kong has “potential,” Singapore has an “increasingly progressive regulatory regime” and Australia is “up and coming.”
The report makes a number of recommendations to keep UK’s competitiveness, including the creation of a “delivery body” to drive high impact policy initiatives, build FinTech “bridges” to support UK Fintech’s international expansion, strengthen the UK’s talent pipeline, encourage growth capital and promote government and consumer adoption of FinTech.
In spring 2015 George Osborn, the Chancellor of the Exchequer, announced a number of initiatives, including a £10 million fund to research digital currency and blockchain related sectors, with the aim of making London the Capital of Fintech. It seems, for now, he has succeeded by creating a highly welcoming policy environment.