The FCA has published a “Call for Input: Regulatory barriers to innovation in digital and mobile solutions“. Our blog about this is here. Here’s our (experience-based) submission:

1)  Many first time #FinTech innovators don’t know they’re entering a regulated area. When they find out, they’re astonished by: (a) the cost of complying; and (b) the potential consequences, if they don’t. This can delay innovation, or kill it stone dead. The FCA’s communications strategy, the Innovation Hub, and the regulatory sandbox, help. But more is required.

The biggest barriers are:

(a) the up-front time and cost of complying with the permissions and exemptions regime, especially when the law requires a #FinTech business to be authorised or exempt before it can properly develop and road-test its ideas, and prove its business model; and

(b) the financial promotions regime, especially for early stage businesses when the investors are making small contributions, they’re often friends and family, but the usual exemptions don’t apply.

What can the FCA do?

(a) Work out whether a “friends and family” financial promotions exemption would make sense and, if it would, seek to persuade HM Treasury to include a new exemption in the Financial Promotions Order;

(b) Develop and publish a policy on regulatory forbearance, that #FinTech innovators can rely on, if certain carefully defined pre-conditions are met; and

(c) Develop and publish some more, practical, #FinTech, solutions-based guidance, to help innovators find practical, low cost ways, of meeting the #FCA’s expectation.

2) Although some parts of the market reacted badly when the FCA introduced its crowdfunding and P2P lending rules, few now think it was the wrong thing to do. But that doesn’t mean the FCA got it right.

What can the FCA do?

Road test its crowdfunding and P2P lending rules to make sure it’s struck the right balance. Anecdotal evidence suggests the rules are too conservative. If they are, and they can be appropriately adjusted, that could make it easier to raise capital to support innovation.

3)  Some innovators are planning new businesses that will use virtual, digital or crypto-currencies at the “front-end” (a digitial currency exchange), and/or at the “back” (to lower transaction costs / increase speed and certainty). But they have a strong sense that, sooner or later, the UK (or Europe) will introduce a BitLicence, like New York and California. HM Treasury’s anti-money laundering proposals don’t lower this concern; they increase it. (If AML rules are required now, a BitLicence will surely be required later on.) And this is delaying innovation. (Shall I start my business now, or wait for the BitLicence to avoid to adaptation costs it’s likely to bring?)

What can the FCA do?

There are good reasons for supposing that the UK would benefit from a BitLicence of its own. The FCA could analyse whether a BitLicence is desirable, or not (perhaps, by piggy backing off ESMA’s work in this area); and, if industry perceptions are right, it could create Europe’s first BitLicence, rather than waiting for others to take the initiative for it.

If you’re considering whether to submit a response to the FCA’s call of your own, you may wish to use its online form; to send an e-mail ( using the subject title “Call for Input: Regulatory barriers to innovation in digital and mobile solutions”); or to write to Helen Ginter, @ The Innovation Hub, Strategy & Competition Division, The Financial Conduct Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS. The call for input closes on 7 September 2015. Submissions received after that date may not reviewed.