George Osborne is 'proactive and knowledgeable' about Bitcoin's blockchain technology

Chancellor George Osborne, the poster-boy for London's fintech sector, is knowledgeable and proactive about the technology behind bitcoin – something most comers to the sector have difficulty understanding.

IBTimes UK spoke to Lawrence Wintermeyer, chief executive officer of Innovate Finance, a government lobby group, which was personally launched by Osborne at the bustling technology accelerator Level 39 in August 2014.

He said: "George Osborne is really the poster boy for fintech. Arguably it could be any tech, but he is knowledgeable, he is proactive.

"I appreciate the government's approach, which in essence is an open approach. They are saying: 'look, it's likely these things are going to be here to stay, it's better that we have an open system and understand how to register them and work with them – nobody has worked out how to regulate them."

Wintermeyer said the government and the Treasury recognise 40 digital currencies that are "bitcoin-ish" and see these as potentially playing a part in the global payments infrastructure, which London has historically been at the heart of, as well as the currency and FX markets.

London's fintech ecosystem

All bitcoin transactions are recorded on a public digital ledger called the blockchain, which is updated continually by a peer-to-peer network that eliminates the need for centralised control, not only of currency movements, but all sorts of value transactions.

Money is pouring into London's fintech ecosystem at a rate that would give even the most battle-hardened venture capitalist a nosebleed.

Europe saw the fastest rate of growth in this area: 215% to $1.48bn in 2014, of which two thirds went to the UK and Ireland, according to figures from Accenture.

VC Investments in bitcoin/blockchain technology start-ups alone stood at $459m for 2014, which has reached $229m in the first quarter of 2015 alone.

Wintermeyer said London is leading the way due to its dense population of mathematicians and scientists who understand financial services, condensed around places such as Canary Wharf, the City and increasingly Shoreditch for the entrepreneurs.

This extends to the north where a lot of the big banks and building societies have processing centres, as well as cities like Manchester and Leeds.

Wintermeyer said: "A few years ago would have been hard to raise capital, find trade sales, exits – people would not have known what a unicorn is [a technology start-up company with a billion dollar valuation].

"It's the first time in 25 years I have been here that we are starting to take venture capital very seriously. There's a lot of momentum and a lot of liquidity coming into the market. It's still a bit early but if it carries on at this rate into next 10 years we will see fields of unicorns and IPO sales."

Innovate finance is a not-for-profit members association and part of the government's policy to push technology. It is David Cameron's and particularly Osborne's drive to see fintech maintain its UK dominance. This goal is helped along by removing certain regulatory barriers, such as legislating on open APIs and access to finance.

"Open API is a great example," said Wintermeyer. "The legislation has been put in place and at a certain time over the next 24 months, we will have an open standard for conducting payment transactions.

"Access to finance regulation is good news for SMEs. If they are turned by one of the big banks, there's a scheme in place to ensure they access to a platform in the peer-to-peer lending space."

Busy mix in the consultation stage

He added that there is lots going on in the consultative stage not just with the government but also with the Financial Conduct Authority and its innovation programme and sandbox, and the Treasury with things like blockchain.

He said: "When it comes to cypher, they are interested in having the key to everything that has a cypher in it. This is a sovereign issue in a lot of Western countries – they just want to make sure that they can unlock any transaction in the name of state security.

"Most governments have taken the view that they are not willing to authorise any system in any industry that is available for public consumption without the key to access that code.

"The idea that massive payments or counterparty transactions are going on outside of the ability of a sovereign security system is something that you can understandably see would be an issue – but boy isn't it a complex social and commercial issue at the same time, what with your rights to have your data protected."

Wintermeyer concluded by stating the blockchain is probably the biggest trending topic at government level. He added that is the case "whether you are a regulator, parliamentarian, a big bank or a hipster".