As the global financial crisis unravelled in 2009, Paul Volcker, a former Federal Reserve governor, is said to have quipped that the ATM had been the only useful innovation in banking for the past 20 years.
A decade and a half later, the current US administration has moved on from Volcker’s jibe and is vigorously encouraging financial innovation.
In July, Congress passed the ‘Genius Act’ to regulate stablecoins — digital tokens backed by assets such as the dollar or US Treasuries — which allow US banks to issue their own digital assets.
The pace to embrace cryptocurrencies has been slower in Europe and the UK, where some even jest that the ‘Dutch bulb act’ would be a better term for the new US legislation, in reference to the tulip bulb bubble that gripped the country centuries ago.
But after a cautious start, Europeans are making headway.
Just last week, nine European banks planned to develop a new stablecoin with the explicit aim to create a European alternative to the US-dominated market.
Still, things are not progressing at a breakneck pace — the Netherlands based consortium is not scheduled to launch its new offering until the second half of 2026.
In the UK, progress has been even slower and stricter.
The Bank of England is pressing ahead with plans to restrict ownership of stablecoins to a mere £20,000 for individuals and £10m for businesses. The central bank is concerned stablecoins would drain deposits away from the traditional banking sector — cynics might say it's like restricting the number of emails sent to save the Royal Mail.
When George Osborne, the former UK chancellor of the exchequer (and a member of Coinbase’s advisory council) weighed in last month and warned the UK was being left behind on crypto, some were quick to sour their faces. But self-interest aside, Osborne made several valid points.
And while Volcker's contempt in the immediate aftermath of the financial crisis was probably warranted, it is worth remembering that before 2008 there was plenty of financial innovation in London that did the UK banking sector, and the UK economy, much good.
The UK needs to seize the initiative or risk being left behind.