We are days away from a general election and when the new government introduce their legislative agenda on 17th July, I hope it will include a new Smart Data Bill, Digital Assets Bill, National Payments Vision and, in case the government doesn’t introduce one, I will be bringing back my private members bill on regulating AI. 

Future of finance

Numerous factors contribute to the UK’s position as a fintech hub. We have, historically, an innovative and trustworthy regulatory environment, favourable investment landscape, and educated population. Each of these creates the conditions for fintechs to grow, secure early-stage funding, and find digital savvy consumers to use their products and services. The UK has and must continue to play a leading role in the adoption of new technologies in finance.

Both the main parties’ manifestos promise regulation that will support innovation and growth. Labour will “ensure economic regulation supports growth and investment, promotes competition, works for consumers, and enables innovation” while the Conservatives also refer to innovation and consumer protection, promising to reduce “the burden of regulation, freeing up businesses to thrive.”

United in desiring positive outcomes, the manifestoes are, however, yawningly lacking on details about how this will be achieved. I would like to suggest the legislation that I think a new government should be prioritising.

Smart data

The Data Protection and Digital Information Bill was lost during wash up when the general election was announced. One part of the Bill we urgently need is regulatory clarity around smart data. We have the opportunity to build the world’s first smart data economy.

The UK has played a global leadership role in the development of open banking and now has the opportunity to take important steps forward on enabling its future, moving towards open finance, and then the wider smart data economy agenda.

Echoing Innovate Finance’s three-part proposal I would like to see:

1. A 5-year roadmap of extending open banking to open finance. Making open data available in all financial sectors by 2030, including credit, savings, mortgages, and insurance so that citizens can have a complete picture of their personal balance sheet in one place.
2. A 10-year plan to extend smart data to most aspects of the UK economy creating value for consumers and businesses by combining financial data with data from other sectors (energy being an obvious one I have written about before).
3. Getting the infrastructure right. Interoperable standards and data exchange, including digital identity verification. A regulatory regime that ensures competition and fair access. I have shared the JROC request for feedback on proposals for the future entity here and would love to know if you think they strike the right balance? 

The increasing digitalisation of market infrastructure potentially leads also to enabling digital assets and tokens to be more widely understood and adopted.

Digital assets

We are blessed in this country with a tradition of common law that is agile, principles based and internationally respected. We are equally lucky in terms of the institutions that help maintain that position. The Law Commission is a statutory independent body that makes recommendation on how to ensure that the law is as fair, modern, simple, and as cost-effective as possible.

The Law Commission has been addressing the legal treatment of digital assets. These assets, which include crypto-tokens and other forms of digital property, don’t neatly fit into existing legal categories. Here’s what the Law Commission proposes:

1. Things in possession: These are rights in tangible objects, like a bag of gold.
2. Things in action: These are rights asserted through legal proceedings, such as debts or shares in companies.

However, it is the view of the Law Commission that digital assets don’t fit neatly into either category. They recommend recognising a new class of digital assets that meet specific criteria. These criteria include being neither a “thing in possession” nor a “thing in action.” The goal is to create a clear and consistent legal framework for digital assets, ensuring clarity and security for users and markets.  This is in no sense straightforward; I’d be keen to hear your views.

National Payments Vision

The Independent Future of Payments Review (2023), chaired by Joe Garner, described the UK’s payments landscape as congested and recommended a clear overall strategy. A government response in March this year “committed to maintaining the UK’s reputation for a world-leading payments ecosystem, and so has accepted the recommendation to publish a National Payments Vision this year.”  There remains a pressing need for a vision to provide clarity on the new government’s ambition for UK payments. This must be considered a priority.

Although fraud, perhaps understandably, fell outside the remit of the review, dealing with it is perhaps the highest of all priorities in financial services. Tackling the rise of fraud is essential for the sector’s continued success so that consumers and businesses feel safe and secure transacting online.

The next government must prioritise tackling fraud in a holistic way by bringing together all relevant stakeholders, and focusing on solutions that address online fraud at its source.

AI regulation

My private members bill – the Artificial Intelligence (Regulation) Bill – fell when the general election was announced.  I had drafted and introduced the bill to push the government to consider practical aspects of regulating AI and had managed to get it through all the Lords stages of the parliamentary process before it fell.

The bill would put the government’s AI principles on a statutory basis and proposed an AI authority to boost regulatory capability, build public awareness and ensure that wherever IP and copyrighted content is used to train LLMs, it is always used with consent, respect and remuneration.

Currently we are leaving AI regulation to voluntary initiatives from industry and overstretched (and under resourced) regulators such as the FCA/BoE/PRS/ICO incorporating AI into existing frameworks. It’s not enough and I am well aware that UK based organisations concerned with compliance are looking at the EU AI Act.

One of the provisions of my Bill – covered in clause 3 – concerns sandboxes. Fintech regulatory sandboxes, developed in the UK in 2016 were a huge success and are now replicated in well over 50 jurisdictions around the world.

When it comes to fintech, when it comes to financial services across the piece, we have the talent, we have the technologies. What we need is the leadership from the new government to enable the UK to seize all of these opportunities for economic and social good; for the potential benefit of us all.