Major UK Financial Firms Embrace Digital Assets

Digital assets will replace traditional currency in 10 years, London firms say.

The attitude among the financial community is warming towards digital assets for a variety of reasons. Interest in blockchain-powered financial services has peaked in line with the rise in popularity of digital assets combined with concerns over Brexit’s impact on the UK economy and the prospect of major financial institutions missing out if they do not invest in the technology now. Indeed, major banks including Goldman Sachs, Citigroup, and Morgan Stanley are currently developing their own blockchain-enabled financial instruments.

Digital assets to replace fiat in 5-10 years according to survey

A recent survey by Deloitte found that over three-quarters of UK financial firms believe digital assets will become an alternative to—or even a replacement for—fiat currencies over the next five to 10 years. The report comes at a time when there is increasing demand for digital assets and blockchain-enabled financial capabilities within the global financial centres. In London, senior financial leaders have greater concerns than their counterparts in other financial hubs over falling behind if they fail to act now and embrace digital assets.

Digital assets are disrupting financial markets along with financial organisations. These changes are rippling through every aspect of finance from payments and investments, to financial infrastructure—and they’re changing for the better. The report highlights the impact digital assets are having on deposits and custody and the opportunity this presents for banks and financial institutions. It also pointed out that the nature of payments is fundamentally changing from a process disconnected from commerce and siloed within banking infrastructure to an integrated and simultaneous system. Furthermore, the report notes that access to capital, lending, and funding is poised for change as well. Indeed, there are several innovative organisations currently working on novel solutions to payments, lending, and funding.

Weakened sterling pushes leaders towards digital assets

Charley Cooper, Managing Director of blockchain firm R3, notes that the UK’s exit from the EU has: “prompted interest in a digital alternative to fiat”. The concern over a weakened sterling and the need for stability—combined with the pandemic—has placed digital assets at the forefront among UK financial firms. 

Mr Cooper adds that: “The last two years have put unprecedented strain on London’s financial services sector and it is unsurprising the city is putting its faith in new technologies. Brexit has thrown London’s status as a key financial hub into question, and the pandemic has brought to light the legacy processes that have underpinned financial markets for too long.”

Indeed, the Deloitte report found that 41 per cent of UK respondents see digital assets as a means to diversify investments and portfolios, and 40 per cent believe they can be used to develop new payment channels. In summary, Tyler Welmans, Blockchain and Digital Assets Lead at Deloitte UK, noted that the survey showed: “the broad recognition that we have entered the mainstream adoption phase for digital assets. Beyond this, progress for other digital asset classes is also continuing with tokenised securities high on many corporate agendas.”

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