Katharine Wooller is Chief Strategist – Financial Services, Softcat plc, a
FTSE-listed IT company.
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Recently, the Sunday Times ran an article, in which the chair of a bank described crypto as a “non-productive asset”, and made the suggestion that stamp duty could be applied to crypto to encourage investment into equities.
Having been involved in early stage businesses in the UK for 20 years, and having spent over a decade advising founding led businesses as Non-Executive Director. I concur; we desperately need more support to encourage companies to IPO in the UK.
However, charging stamp on crypto is not the answer, not least because its already taxed - as is any other investment gain outside of tax efficient vehicles such as an ISA. Currently It’s almost impossible to buy crypto via an ISA or other similarly tax advantageous routes.
Firstly, lets acknowledge the enormous elephant in the room: I appreciate that crypto has had more than its fair share of scams, hacks, and bad headlines. Regulators, globally, were slow to control an asset class ripe for abuse, and, unsurprisingly, bad actors ran amok whilst credible digital asset exchanges and coins were crying out for regulatory clarity. Since time began, how tightly we control innovation in financial services, and at what cost, is a vexatious question.
Let us be clear, the cost of fraud in digital assets globally is thought to amount to over $10+ billion in 2024 alone, according to Chainalysis a reg tech specialising in blockchain analytics.
At the same time, Juniper Research suggests that online electronic payment fraud is expected to reach $91bn annually by 2028. Financial crime clearly transcends asset classes, and at no point in human history have we totally abandoned cash, nor online payments, nor crypto, rather we have tried to create stable financial systems with robust controls to manage risk. To some extent, regulators and crime agencies are always playing “whack-a-mole” to stay one step ahead of fraudsters.
However, the days of crypto bashing, I would like to think, are over. The industry climbed to a $3.7tr USD asset class, from basically $0, over a 6- year period and thus is probably one of the largest ever wealth transfers in history. A significant proportion of digital assets are now owned by institutional investors, it is thought that up to 90% of bitcoin is owned by large investors.
Almost every major asset manager and hedge fund is involved with crypto, and most institutions are looking closely at tokenisation projects, so the worlds of tradfi and defi are increasingly intermingled.
Unsurprisingly, crypto is considered a hot political issue; its regulation, and maintaining American competitiveness via innovation in financial services, has held significant bandwidth in Trumps presidential campaign the subsequent headlines since his inauguration.
Moreover, there is much to suggest that digital assets are, in fact, a growth enabler. Early-stage businesses, are the life blood of economic growth and innovation, providing job creation, competition, inwards investment, increasing tax revenue and global competitiveness.
Even for those who are not interested in ICOs, nor decentralised exchanges, the technology itself has huge promise for unlocking innovation capital. At the most basic level distributed ledger technology allows for any asset class to be divided into small amounts at a low cost of admin, providing levels of access and liquidity previously
unachievable.
Moreover, communities can access grass roots funding without necessarily relying on institutional investors. Smart contracts can automate funding rounds, vesting schedules, and profit-sharing, reducing legal costs and increasing trust.
With on chain transparency investors can track fund usage in real-time, ensuring accountability and reducing fraud risks. The result is global reach of borderless transactions with reduced friction, lower costs, and faster settlement.
The tokenisation of real-world assets (for example property, real estate, art) is expected to be worth $2tr USD by 2030 according to McKinsey&company, expect crypto to be part of the story for financing growth for years to come.
