Fintech focus: New money makes the world go round

After years of hype and expectation, cryptocurrency has not experienced a good 2022, which has unsettled both consumers and institutions. There was the collapse of a high-profile cryptocurrency exchange last month. And there has been criticism from some commentators about regulation being unable to keep up with the development of the cryptocurrency market.

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Despite such major setbacks, institutional investors have not entirely turned their back on cryptocurrency, with many still showing interest in the sector and its potential – if challenges are resolved.

Scotland’s fintech community currently has one cryptocurrency, Scotcoin, from the Scotcoin Project Community Interest Company (CIC). It says it is a “purpose-driven” cryptocurrency that aims to be a “force for good”.

Temple Melville, chief executive officer of the Scotcoin Project CIC, says: “We have just launched Scotcoin Carbon Offset, making Scotcoin the first crypto to directly sell carbon offsetting. In addition, the offsetting can be paid for in both SCOT and sterling.

Temple Melville, chief executive of the Scotcoin Project Community Interest Company. Image: John Devlin

“We are always looking at ways to enhance the utility and functionality of Scotcoin. Next on the horizon will be a social-based community app, which we see as genuinely pioneering.”

On well-documented global developments in cryptocurrency, including the headline-grabbing collapse of crypto exchange FTX, Melville said that “regulation will now come to the crypto industry in double-quick time”.

Laeeq Shabbir, director at EY, says a legal framework does exist to regulate the market and the Financial Conduct Authority is active in this area. He says: “You don’t have to reinvent the wheel. We have the regulations and we need to look at how we can adapt them to continue protecting consumers.”

Shabbir believes the biggest challenge for the cryptocurrency market in Scotland is to learn from the lessons of the past. “Firms should focus on how to build trust in this ecosystem. They should look at additional assurances beyond audit,” he says.

He adds that it is vital for consumers to do their own due diligence on crypto and all digital assets, as they would with any other financial products. “When people are looking at any service provider or before they decide to invest, they should perform their own proper and robust due diligence. It’s clear there is going to be volatility and they could lose financially on an investment.”

Callum Sinclair, partner and head of technology and commercial at Burness Paull, says there was a lot of hype in the crypto market, and with digital assets generally – and that, as it was over-inflated, the collapse of the crypto exchange might not be a bad thing in the long term.

“Whether it be digital assets, such as NFTs, or crypto currency, there is a bit of a reality check happening,” he says. “For good, properly regulated well-governed propositions, the market will still be there. Players that do it properly will help restore confidence.”