Why London could become the Bitcoin capital of the world

This is one of a series called Explorations down the Bitcoin rabbit hole.

First, my bias. I am a Brit. When I left the UK in 1990, the start up scene was dismal, new ideas were greeted with skepticism and the status quo was glorified. It is a great pleasure to see that point of view so totally reversed now. There is a vibrancy, optimism and big ambition change-the-world thinking that is “oh dear, so Unbritish”.

The UK tech scene has had false starts before. 8 years ago I was writing about how innovation was going global and yet Silicon Valley still dominates to an extent that I did not envisage when I wrote this post on ReadWrite in 2007.

I think this story about London as a leading global Fintech/Bitcoin center has legs for 3 reasons:

  1. Critical mass of techies and rich people. Paul Graham of Y Combinator fame famously said that all you need for an innovation center is (i paraphrase) techies and rich people. There is one caveat. The rich people must have made their money from the domain you are asking them to invest in. If the rich person made their money in property or manufacturing, a digital startup just looks ridiculous. London has plenty of people who made their money in Finance. They know that even the most venerable institutions are “data centers with fancy lobbies”, so a new tech powered innovation is not too big a stretch for them.
  2. A light regulatory touch. Compare what the Cameron government is proposing vs what the New York State Department of Financial Services has proposed. It is clearly a fine line to walk. It is counterproductive if a center becomes a haven for scamsters and consumers to lose a lot of money. Bitcoin is a global phenomenon and many Bitcoin startups have global teams who can decide where they want to be based and regulation (along with talent and capital) is key to that decision. Regulation to protect consumers is good. Regulation to protect incumbents from competition is bad. New York has a lot of incumbents that certainly want protection; if they succeed in getting it, London will have a playing field tilted in their favor.
  3. Talent with the right mix of domain expertise and deep tech. Fintech needs both. Deep tech expertise can be found in any location with good Computer Science colleges. Fintech startups need those engineers in the same room with people who understand the nuances of things like credit rating, derivatives, exchanges, asset management and so on. The devil is in the details that sit at the intersection of both deep tech and. domain expertise.

I see three “straws in the wind” to indicate that this is happening now:

  1. MeetUp attendance for hot new Bitcoin 2.0 platforms such as Ethereum. These could be huge or they could be flashes in the pan. What matters is how the techies are voting with their time. London is doing well on that score.
  2. The VC funding for Bitcoin startups. The numbers from Coinbase show Europe ahead of Asia in Q2 ($30.9 vs $20.8). This is still a long, long way from the $186m for America and I would like to see the regional numbers (e.g NY vs Valley and London vs Berlin) but I suspect that London is far ahead of any other European center. The Valley will always score on access to big Funds. What matters is London vs New York i.e two centers with deep Financial Services domain skills and networks.
  3. Big Silicon Valley Funds such as Accel see the trend lines and are setting up in London or strengthening their operations.

This is one of a series called Explorations down the Bitcoin rabbit hole.


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