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What Brexit Means for the Global Fintech Market
Jun. 26, 2016 07:20PM PST
Fintech Investing
Britain’s decision to leave the EU is making waves all over the world, particularly when it comes to fintech.
The results of Brexit have left the world astonished, as we wait to see the inevitable consequences of its decision. One of the most immediate and tangible aftereffects of the the referendum is the drop in value of the British pound. After Britain voted to leave the EU, the pound dropped more than 10 percent in value overnight. Investors all over the globe have been selling of pounds to limit their exposure to the U.K. currency.
What does this mean for fintech?
Traditionally, the value of digital currencies like bitcoin increase when there is perceived instability in fiat currencies. This trend held true in the case of Brexit. With the massive drop in the pound’s valuation came a spike in bitcoin price. According to CoinDesk, bitcoin price jumped as high as $688.51 on Friday, after the referendum results were released. This marks a significant increase from Thursday’s low of $553.93.
Although digital currency investors should be rejoicing right now, the news of Britain’s decision to exit the EU has caused some ambivalence in the fintech community. By leaving the EU, England has made it more difficult to trade and do business across European countries. This obstacle will affect all sectors, but is acutely felt by the fintech community for multiple reasons. First, London is a significant commercial hub for the fintech market. Indeed, Accenture calculated that the UK and Ireland accounted for 40-percent of all fintech investment in Europe last year, with much of this concentrated in the British capital.
Secondly, the ethos behind many fintech companies is towards global currencies, payments, exchanges and finance. The UK’s decision towards installing boarders (rather than breaking them down) poses both philosophical and business-oriented questions for these companies.
Therefore, while Britain’s decision to leave may have caused the value of cryptocurrencies to spike, it may have simultaneously caused more regional shifts for the market, as companies look elsewhere in the EU to build their business.
This sentiment is being widely echoed by news publications, which anxiously wait to report the long-term repercussions of this decision. Indeed, the International Business Times has gone so far as to say that “consensus among the technology community is that Brexit will topple London from its position as the most favoured fintech hub on the planet.”
In this case, it seems as though our only option is to wait and see what the follow out brings. However, wise investors will be rushing to navigate the complexities introduced by Britain’s decision, by both investing in stateless cryptocurrencies and remaining diligent about any London-based companies and investments which will be negatively impacted by the vote.
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Securities Disclosure: I, Morag McGreevey, hold no direct investment interest in any company mentioned in this article.