“Crypto is going to disrupt finance,” Matt Hancock told me, speaking over a video link from his office in Portcullis House in the UK Parliament. Wearing a navy blue shirt, Hancock was seated behind his desk. On the wall, to his right, there was a framed photograph of him in a charity horse race. Oxbridge educated, an Englishman by birth and upbringing, Hancock has been a Member of Parliament for West Suffolk since 2010. In 2018 he briefly served as a Secretary of State for Digital, Culture, Media and Sport and has entered history’s annals as the UK Health Secretary who led Britain through the pandemic. Hancock has recently resigned from Boris Johnson’s cabinet and as a backbencher is now focusing his efforts on cutting-edge crypto technology that will make the UK a global hub for digital assets.
“At the moment, the political debate around crypto seems to be simply about individual coins, whether they’re going up or down. But that is just scratching the surface of the impact of digital assets in the way that things are run, the way the world is organized,” said Hancock. “Inevitably, there’ll be an impact on politics.”
—Will it also modernize British politics and the mindset of British politicians? I put the question to him.
“I think that British politics, and in fact, around-the-world politics is best when it’s looking forward,” he exclaimed. “British politics is the best when it’s embracing new technologies,” said Hancock, who sees crypto as “a big opportunity” for Britain.
I was really struck when I went into the House of Commons, at the start of this year, into a debate to find nobody was talking in favor of crypto currencies.
Matt Hancock MP
The challenge for those in favor of crypto in the emerging debate on digital assets, Hancock is aware, is that despite its explosive growth, many believe that crypto is a problem.
“I think that’s a misunderstanding of the technology,” he explained with a warning that “it does create a political dynamic in which people can be against a technology that they don’t fully understand.”
Before entering the hallways of Westminster, Matt Hancock worked as an economist at the Bank of England and as Chief of Staff to the Shadow Chancellor of the Exchequer. While Hancock’s interest in crypto has been forged by his background, the ideas he has brought forth to the UK Parliament have still not entered the political mainstream. There’s a lag in conversation between him and many of the governing class who are still catching up with crypto.
“I was really struck when I went into the House of Commons, at the start of this year, into a debate to find nobody was talking in favor of crypto currencies, because they thought that crypto was something that people use to evade sanctions and money laundering,” he revealed.
“That association is so negative, and so narrow, and a complete misunderstanding of the fact that actually with a store of value held on the blockchain, it is easier to investigate.” He added, “This is the next stage of the digital revolution. It is happening. Policymakers need to be ahead of that.”
—Are you going to be the one to lead this revolution in the UK?
“I’m just determined to talk about it,” he responded. “We can harness this technology for the good of society.”
Hancock’s active stance on crypto, he told me, “doesn’t mean I’m blind” to the fact that this new technology comes with challenges, but he points out that he’s “realistic that real money has its problems” as well.
“If you want money not to be traced, the best thing throughout history you can do is put it into cash and move it around. This idea that, instead, having a traceable immutable record makes things worse, it’s just wrong,” he explained. “So yes, I am speaking out as loud as I can, for a progressive, objective, positive approach in politics and policymaking towards this new technology.”
In December 2021, US legislators at the US Capitol held their first bipartisan Congressional hearing on digital assets. “There has been an inquiry in the House of Lords narrowly focused on CBDCs, but there has not been a major parliamentary hearing or inquiry,” said Hancock. He paused for a moment, an idea blinking in his mind. “I would welcome that to happen [in the House of Commons]. Yeah, maybe we should think about that.”
The Prime Minister Boris Johnson is a supporter of having an innovative regulatory system
Matt Hancock MP
That Britain is pressing forward with financial innovation is indicated by the UK government initiative to launch its first digital asset. UK Chancellor of the Exchequer Rishi Sunak has asked the Royal Mint to create the first NFT that is expected to see the light of the day in summer 2022.
“Rishi Sunak understands this area, he understands the power of technology. He’s a pro innovation guy,” affirmed Matt Hancock. “The Prime Minister Boris Johnson is also a supporter of having an innovative regulatory system,” he added.
“My frustration was that things were moving too slowly. It’s all very well, having the government saying that they’re in favor, we need to get the action on the ground. But to make it easier for the government to do the right thing, I’m determined to make sure that there are voices out there like mine making the positive case, because it’s hard,” Hancock was honest. “I know, from 10 years in government, it is far harder to do something even if you want to do it if there aren’t other voices making the argument for why this is the direction we should go,” he revealed.
“I see crypto as a force for good. It needs to be harnessed, it needs to have a liberal, progressive regulatory regime. I want the UK to love crypto. I want the UK to see this as something that can benefit everybody.”
In the US, stablecoins —cryptocurrencies whose values are linked, or pegged, to a reserve asset such as the US dollar— are slowly entering the mainstream. In Britain, the UK Treasury is looking to introduce them.
“When you have a stablecoin, and you advertise it as a stable coin, you want confidence as a user that it’s going to stay pegged and stay stable,” said Hancock. Having a system of stablecoins in whose value and stability people can be confident is something Hancock deems “a very valuable next step” for Britain.
In March this year, Matt Hancock hosted in the UK Parliament a crypto billionaire, the founder and CEO of Binance, the largest cryptocurrency exchange in the world, Changpeng Zha. “We had a very constructive discussion about how best to ensure that there’s a high quality ecosystem in place here,” Hancock revealed.
The former UK State Secretary for Health had numerous conversations with the leaders of a number of different digital assets companies, especially the exchanges, “who want to see a highly reputable, well regulated, positive ecosystem for the industry, and we want to put that in place. We want to also attract that to happen here in the UK.”
In all interviews The Pavlovic Today conducted with the major crypto players in the US, a common thread emerged: a warning against the flight of the US capital in the absence of regulations, leading the innovators to take their companies outside of the US. Sam Bankman-Fried has made the Bahamas home of the FTX, and Changpeng Zha has made Paris a European Headquarters for Binance, after France gave it regulatory approval.
“I don’t want to see that happening. I want to see when people look, especially in the European time zone, I want them to be based here in the UK. That’s how we succeed as a nation,” said Matt Hancock.
For post-Brexit Britain, there is a window of opportunity to become the crypto innovation hub in Europe at the time the EU is toughening up their position, with the MiCA regulations on digital assets. “I’ve seen some of the comments [on crypto] from the EU policymakers, all very negative, and quite narrow in their focus. And so there is an opportunity for the UK to get this right,” Hancock shared his vision.
An emerging trend in American politics 2022 is that the donors of the biggest parties, Republicans and the Democrats, are starting to direct their funds in support of pro-crypto candidates. Crypto super PACs are looking to disrupt politics and help crypto-friendly candidates get elected. The Americanization of British politics in these terms, according to Matt Hancock, would be “spectacularly unlikely” across the pond.
“We have a different system for political donations in the UK. It is one that I think is so much better here, which is that there are super tight limitations on the amount that you can spend. Expenditure for a race for a seat in the UK Parliament is around between 20,000 and 25,000 pounds limit. That is a good feature of the UK system because it means the politicians don’t have to spend all their time fundraising. We can concentrate more easily on policy,” said Hancock. “And we don’t have to play as much golf.”
El Salvador, led by the President Nayib Bukele, is the world’s first sovereign nation to adopt bitcoin as legal tender.
—What do you think about countries adopting Bitcoin as a legal tender?, I asked Hancock.
“Obviously it’s their goal,” he responded. “My attitude is this: if you have a major currency that’s widely traded, and with deep and liquid foreign exchange markets, then the importance and the value of low cost international exchange is something that you’re not as close to. Whereas, if you have a country that either has a very lightly traded currency, and therefore, the markets aren’t liquid, or if you’re a country that relies entirely on another country’s currency, like the US dollar, then I can see a strong argument for using a blockchain based currency, cryptocurrency as your legal tender, if that’s what you want to do,” he said.
Hancock went on to emphasize,“ I’m not proposing this for any other country. I’m a British politician making judgments about what’s best for the UK, but my attitude to it is that I can see the value of that far more in a country where you either don’t have your own currency, or you’re completely pegged. That is then a much more attractive proposition.”
Crypto has been seeing a deep plunge in the past few weeks with Bitcoin going below $32,000 but Matt Hancock told me that he has “absolutely no view,” on the matter. “I don’t really care about the valuation,” he said. “That’s not my point. My point is that the underlying technology is going to have a radical impact on the way that our financial system runs, and we need to be ahead of that. It’s going to happen whether we like it or not, we don’t have a choice.”
A question that naturally arises for any pro-crypto politician is whether or not they hold any cryptocurrency.
“I purposely don’t own any cryptocurrency,” Hancock made it clear.
“I’ve been criticized for ‘therefore you can’t understand if you don’t own it.’ But then the thing is, the moment I owned it, I’d get a load of criticism the other way around saying that I say that I’m only talking about in the hope that my own assets have gone up in value. So, I wanted to avoid that criticism.”
—The IMF has been demanding that El Salvador abandons the legal tender of crypto. Should the IMF interfere?, I asked Hancock.
“I think it’s a matter of El Salvador, “he said. “One of the fundamental basis of being a nation-state is, you should be able to choose what your currency is.”
—Some countries support digital assets, but then those like China are doing a big crackdown on crypto. How do you understand that in terms of democracy versus autocracy?
“What we’re increasingly seeing is that crypto is a liberal innovation. So, it’s hardly surprising that the most centralized dictatorial systems are the ones who are increasingly falling out with crypto. Because crypto is ultimately democratizing by its nature. And those of us who believe in open societies should welcome crypto as another mechanism for dispersing power away from the core of the financial system and putting it in the hands of users. That is in the nature of cryptocurrency,” said Hancock.
“Democracies succeed in the world when we let ideas flourish within a framework. So I agree that the regulatory framework is necessary, but it must be a liberal one to allow the ideas to flourish.”
From this year, digital assets are subject to the US tax code, but how does Matt Hancock see the most feasible and fair taxing code or system for cryptocurrency in the UK?
“To understand the impact of crypto, you’ve got to understand the financial system quite deeply, because the technology separates out various functions that previously have all been clubbed together,” Hancock explained. According to him, “the tax authorities have had some false starts in overtaxing elements of crypto and in particular, overtaxing trading and holding of crypto by seeing it as akin to a physical product, when it is better seen as akin to a financial instrument.” The rules on all those things, Hancock believes, are different.
“You need to be able to trade. If you tax every trade, then you put sand in the wheels of the system,” he said. “If you treat a crypto asset, a digital asset, as if it’s a building, then you’d have a much worse tax system. You don’t trade buildings every few minutes. But you do need to be able to do that for financial assets like crypto assets.”
For Hancock, “it’s about giving the conceptual purpose of a particular element of crypto right. And then making sure you have a liberal tax regime that fits that, that encourages activity. But also make sure that there is a reasonable tax regime.”
Hancock is a self-declared “big fan of retail investors” as an investment category that empowers people to invest in digital assets guided by high-quality information and advertising rules. The regulatory category called “sophisticated investors,” which one can only access from either operating from an institutional basis, or with a high net worth is, in Hancock’s view, “horrible” and is the cause of “financial exclusions” that should not be applied to digital assets.
“What you need is a high quality information system, and rules around disclosure, for instance, that are sensible and light touch but nevertheless, make sure that people can make good objective decisions, whether they’ve got $50 to invest, or $50,000.”
As Britain moves forward into the next General Election, it will be fascinating to watch the making of the case for crypto and digital wallets for a British voter.
—Why would a British voter care about crypto?, I inquired.
“Because innovation matters,” Hancock quickly declared. “What would I say to a voter of mine in Newmarket if they asked me about my interest in crypto? We’ve got to be on the side of the future,” exclaimed Hancock. As a member of the vanguard in the national conversation on digital assets, Matt Hancock is very much at home with modernity. “Digital revolution has empowered people. Crypto is no different to that.”
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