London: The World’s Capital for Foreign Exchange Adds Cryptocurrencies to Its Ledger

Since London was tied in the top tier with eight other hubs for regulatory structure – a driver and the most heavily weighted criteria overall at 35% – its top-three result is due to its relatively high crypto adoption score (which was weighted 10%). Chainalysis ranked the U.K. 17th in the world. Only the U.S., at fifth, was ranked higher. Another plus: top-10 score for ease of doing business (10%), in the enabler category. Remarkably, since the opportunities criteria is measured per capita, London scored high for crypto jobs, companies and events despite having one of the larger populations of all our hubs.

Old meets new in London. The city that is home to the world’s oldest and most trusted stock and foreign exchanges is positioning for the future by embracing cryptocurrencies.

London’s self-declared efforts to become a global crypto hub were rewarded handsomely in June when venture-capital giant Andreessen Horowitz (a16z) chose it as the home of its first office outside the U.S.

The city is the world’s top marketplace for foreign exchange. Its “London session” is one of three trading sessions that keeps the forex market open 24 hours a day. And the London Stock Exchange is more than 300 years old. With this extensive traditional finance infrastructure in place it is already a global hub for trading of liquid assets, including crypto.

“This puts London in pole position to serve the world as a hub for crypto, as businesses and institutions seek trusted and reliable trading partners,” Nick Philpott, co-founder of institutional crypto trader Zodia Markets, said.

London is often seen as a gateway to Europe’s jurisdictions, offering connectivity to international markets, which brings with it a wide range of sources of investment, from venture capitalists to angel investors. Chris Dixon, founder of a16z’s crypto division, cited the U.K.’s “predictable business environment,” as one of the factors behind its decision to open an office there.

Furthermore the U.K. is home to some of the world’s most esteemed educational institutions which help to feed top-class talent into London’s startup scene.

“There are around 363,000 individuals that work in the financial sector, dwarfing any other city in Europe, such as Paris where there are 144,000 and Frankfurt where there are 65,000,” said James Butterfill, head of strategy for CoinShares.

“We are hiring,” he added, “and are finding many European potential employees are keen to move to London as they consider it the fintech hub of Europe.”

London’s interest in crypto is not just top-down and corporate. The U.K. has a healthy grassroots adoption rate, with YouGov estimating that around 10% of the adult population have bought cryptocurrency as of January 2023. Blockchain analytics firm Chainalysis placed the U.K. in the top 20 countries for crypto adoption.

The key to London’s continued viability as a crypto hub, however, will hinge on the sort of regulatory environment that is fostered by its lawmakers. Local crypto startup founders are watching closely.

Having left the European Union in January 2020, the country should have the freedom to offer greater flexibility to create a helpful environment for digital assets and blockchain technology. Where the E.U. has established a bespoke regime with its Markets in Crypto Assets (MiCA) regulation in April, the U.K. is looking to work crypto in its broader Financial Services and Markets Bill.

Prime Minister Rishi Sunak has made his desire to turn the U.K. into a crypto hub well known, but the window to turn aspiration into reality may be closing with the 2024 election.

“The big question is whether the U.K. will act fast enough to keep up with smaller markets like Dubai, who have even more to gain,” said Paul Ridley, founder of London-based crypto asset manager Old Street Digital.

“Rishi Sunak’s tweets are great and all,” Ridley said. “But can he get actual legislation passed before the next election?”