Philip Hammond’s recent announcement of a task force to combat cryptocurrency fraud shows that the dark web is now on the forefront of government concerns, writes Rasika Sittamparam
‘You only need to pay a thousand pounds to steal someone’s online identity,’ warns Donal Carville, the CEO of Circadian, a fintech start-up that protects business transactions against cybercriminals. The amount is a pittance if one looks at the potential: instead of an iPhoneX, you could buy a billionaire’s identity and rake in millions using their credit card details.
Carville is an exhibitor at the Treasury’s second Fintech Conference, held at Tobacco Dock’s Grade I listed warehouse – and he was not the only one to raise the issue. Amid excitement over ‘new technology’ in finance, visitors were warned not to forget about fraudsters evolving under the cloak of the dark web, where cryptocurrency reigns lawlessly. There was also no shortage of start-ups in attendance ready to promote a variety of solutions – both to combat cyber criminals and to keep transactions secure.
Of course, there was also much to celebrate: ministers, investors, venture capitalists, techies and bankers applauded the ‘digital revolution’ which is sweeping financial institutions globally – although it’s worth noting that the post-Industrial phrase has been thrown around since the 1950s. What’s new is that we are now experiencing a new sub-chapter of digital revolution whereby financial institutions – amid an increasingly complex regulatory framework with the arrival of MiFID II and GDPR – work in a buzzing fintech marketplace. In fact, the industry reached a record-high valuation of £1.8 billion in 2017.
The conference was also notable for Philip Hammond’s announcement of a cryptocurrency ‘task force’. The Treasury project – in partnership with the Bank of England and the Financial Conduct Authority – is the world’s first, and billed as a testament to Britain’s commitment to create a safe fintech haven for global investors. ‘It will help the UK to manage the risks around crypto-assets, as well as harnessing the potential benefits of the underlying technology,’ Hammond said. This announcement was in line with Mark Carney’s earlier call for a crackdown on what he referred to as the cryptocurrency ‘mania’.
Meanwhile, the world of fintech criminality has become increasingly sophisticated. Sir Geoffrey Vos, chancellor of the High Court, recently said that modern hackers ‘make the frauds of yesteryear look modest’. It looks like Hammond is taking on a gargantuan task, akin to swinging a mace in a dark room with holographic opponents. Even so there are silver linings: crypto-assets are just about traceable through Blockchain – a digital ledger which tracks all manner of peer-to-peer transactions. It is this technology that Hammond and co will need to grasp firmly, as acknowledged by a member at an earlier Treasury Select Committee’s inquiry.
Regardless of how nascent the ‘task force’ is, it is a welcome measure for HNWs in the UK, some of whom will hold millions in cryptocurrency. These are worrying times: Japan’s recent report by its National Police Agency found that more than $660 million Yen held in cryptocurrency was lost in 2107 from fraud and theft. It’s not known how much wealth has been lost in the UK.
In fact, that’s what the government’s crypto-force is trying to figure out. Being the world’s only progressive government project on monitoring crypto-risks, Hammond’s task force will need to understand how crypto-assets can be successfully managed and utilised, rather than banning the digital transactions the way some countries such as China, Russia and the US are trying to do.
Monitoring crypto-currency is better than banning it: a liberal attitude to the ‘new’ digital revolution is surely what Brexit Britain needs. The rapidly emerging profitability of the FinTech world, worth almost £7 billion to the UK economy, is unignorable.
The good news, from Spear’s conversations across Tobacco Dock’s meeting rooms, is that some of the world’s greatest fintech minds are escaping the ‘stagnant’ opportunities in Silicon Valley, to brand new offices in Old Street and King's Cross – in defiance of French President Emmanuel Macron’s attempts to encroach on London’s market share.
‘What I love about London is it’s so international,’ said Nikolay Storonsky, a Russian CEO FinTech start-up Revolut. ‘Paris is not international at all.’ And that’s good for Britain.
Rasika Sittamparam is a writer at Spear’s