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Lord Hammond: 'I have been dismayed by the populist turn my party took'
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Oct 7, 2024
Former chancellor Lord Hammond shares his vision of crypto and blockchain as the future of the UK's post-Brexit financial services sector - as well as some damning criticism on the direction of his former party. Now serving as chair of and shareholder of blockchain firm Copper, Hammond has thrown his weight behind crypto as the future of the UK's financial services sector after leaving office. He tells City A.M. about life after politics, the direction of the Tory party, and why he's bullish on the future of London as a financial hub. Don't forget to like, share, and subscribe for more insightful discussions! 📰📱🔔 #fintechnews #blockchain #ai #crypto #postbrexit #financialservices #technologytrends #financeindustry
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Hello, I'm Charlie Contry from City A.m
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And today we are talking about too volatile and tumultuous worlds. I think it's fair to say those of crypto and politics
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Now, the crypto industry is being brought more into the mainstream of finance, into the city and under the heel of regulators and politicians
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I'm very pleased to say that my guest today is a man who has straddled both of those worlds
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And I hope he doesn't mind me saying has taken one of the more interesting career pivots after his time
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in politics. So Lord Hammond, thank you very much for joining us. Pleasure. So take us through a bit of that pivot, because walking into Copper HQ today
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you know, it's a very fintech, Soho, flashy vibe. What was that transition like
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Are you suggesting that I'm not fintech, Soho, flashy? Look, I was always interested in fintech when I was Chancellor. To me, it's always seemed like
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the way to give UK financial services a post-Brexit future to ensure that we were at the forefront
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of embracing new technology, taking up and deploying new products and services
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And obviously, blockchain is one of the new technologies, along with AI, that are going to
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disrupt the sector and probably many other sectors as well. So after I left government and got an
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opportunity to work with copper first as an advisor and then as we restructured the governance of the
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business to become chairman of the board, that was. something that I was very interested to do
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Are there learnings now that you, you know, coming back into the private sector, you think sometimes why weren't we doing this
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Why aren't we working in a certain way when you're at copper? It is important to understand the constraints that there are on government
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The risk-reward ratios are different in politics from business. You know, in business, you take a deep breath, you make a decision, you get it right
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You make a lot of money. You know, in politics, you take a deep breath, you make a decision, you get it
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right, nothing happens, you get it wrong, you're finished, you know, you're over. So it is inevitably
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the case that people are a bit more risk-averse in government and rightly so to some extent
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And I think having an understanding of what the challenges are from the policymaker and the
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regulator's point of view, as well as seeing the opportunities from the commercial point of view
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is quite important. But I think it's been an interesting shift since you joined COP, I think it's
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fair to say, just in terms of the tone of discussion, the environment that blockchain crypto firms
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are operating in, you join in something like the heyday at the end of 2021. What's your take on
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that change? Do you think that there is a future for cryptocurrency in blockchain firms in the UK
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What's your kind of centre of the mood there? Well, there are three things, I'm to say. First of all
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the macro environments changed in the sense that we're now in a high interest rate world. And I think every
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financial product has to be looked at afresh to see how it works in a very different environment
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from that in which it was created, if you like. So there is a different sort of environment
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that we're operating in. Secondly, we've all been affected negatively by the paranoia
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around blockchain and crypto that has embraced US regulators. and authorities. I do not believe that that will continue. I think the US has far too much
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to lose from being outside the blockchain revolution And I suspect that after the American elections we will see a more pragmatic approach where US regulators frankly not only re but seek to take control of the market for
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crypto assets. You've been quite critical of UK regulators in the past in their approach to crypto as well
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Do you think that we're sort of the best of a bad bunch in that sense? So that's the third leg
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What's happening in the UK? My criticism has been that I believe that the UK
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UK, because of Brexit, is in a special and negative position. We have to do something to create a sense of
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a narrative for financial services in the post-Brexit world. And I'm disappointed that we haven't
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done more to give financial services a clear message that there is a post-Brexit life, that financial
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services can and will remain a very important part of the UK economy. And to me, one of the ways we
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could have signalled that would have been taking a little bit of risk and displaying a little bit
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of agility in embracing blockchain-based technologies and in particular trading of crypto assets
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ahead of some of our competitors. I think it's probably fair to say that right now, and this may be a
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moment in time. So this may be a little unfair, but right now, you'd have to say the European
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Union is ahead of the UK in terms of its approach to regulating crypto asset trading. That is
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not a place that anyone that knows the history of UK financial services would accept. We've always
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been in the lead in Europe. We've always been people driving the agenda and we need to get back there
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again. I mean, when you think of having conversations with your clients and the sentiment there
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from the city, from European financial institutions, is the appetite still there? Have you seen
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that recede over the past year and a half? Has there been some squeamish and a snout towards
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the appetite for crypto? Yeah. Well, look, obviously, copper only deals with institutions
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We're not into retail at all. So everything I say is about the institutional market
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Obviously, many of the big financial institutions that were dipping their toe in crypto are US-based
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and have inevitably been affected by the negative messaging that's come out from regulators in the US
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And also, I think there's been a bit of a climate of fear that people who thought they were doing
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things that were permitted by US rule makers feared that they might find out afterwards that they were
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non-compliant. So that has slowed the market down. It's no doubt it's affected valuations
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It's affected volumes. Behind all that, almost all of the big players believe that you can't put
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this genie back in the box. You know, blockchain exists. Crypto has been invented and it isn't going
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to be disinvented. It's a question of reconciling the growth path for both crypto and the digitization of
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traditional financial assets with the pace of US regulatory engagement. And in a sense, the US has given other regulators, has let other regulators off the hook
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because the slow pace in the US or even the retro steps in the US have allowed other
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regulators to say, well, you know, we just need to wait and see what's happening over there
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Yeah. And just to come back to Coppa specifically in the UK critics would say that Coppa was in a sense fell at the first hurdle by not you know clearing the money laundering requirements Do you think that the FCA has been overhanded there Why did copper fall at that hurdle
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Well, very few companies at that early stage did pass the FCA process and move on to the
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permanent register. Some more have done so since. Copper remains in a constructive discussion with the
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FCA. And we certainly aspire to be registered and approved in a number of jurisdictions we want to be
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able to offer our client's choice. And if we just, I suppose, look at the big political picture again
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the tone of voice that's being adopted around this industry. The question I really want to ask is, was Matt Hancock's foray into crypto a helpful one for the industry
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But do you find the level of debate there helpful? Is it in the right direction
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Most people will recognise. There's a lot of people talk about crypto who don't actually know what it is or how it works
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So I think some of the noise has not been helpful. But I think, you know, to me, the picture is becoming clearer now
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The US is in a period of denial about crypto. That, I'm sure, will end after the next election
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And I expect that in two years' time, just a bit of perhaps a bit more than two years' time
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we will see the US re-engaged in this market. And I think the investment and activity that is going on in big US-based institutions
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banks in particular, the billions of dollars that are being invested, rather support the view that the US is not going to sit this one out permanently
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Yeah. I mean, beyond just crypto as well, the political machinations we've seen over the past year
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and a half in the UK, it's not really creating a sort of favourable environment for businesses
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at the moment, is it? Do you think as a business owner now that we have kind of shot ourselves in the foot
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slightly with what's gone on over the past year for tempting in businesses, allowing them to grow here
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Obviously, business doesn't like uncertainty. and turmoil that we saw in the autumn of 2022 was deeply unhelpful
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But the scarring is minimal, in fact. We hear a lot of nonsense talked about interest rates being affected by that series of events
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But the truth is that interest rates have moved on across the world
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across all different jurisdictions. And I don't think what happened then has had any lasting impact on the UK
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I do, however, think it's true to say that since 2016, since the Brexit referendum and the unexpected, for many people, result of that
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The UK's reputation for being a stable, slightly boring place has been undermined
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And that's problematic. It's not fatal, but it's problematic. And we have to work harder to attract businesses and to reassure people that this is an environment where business
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can thrive and entrepreneurs can make money. On the stable point, that was a reputation that was
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attached in some way to your former party as well. It was how the Tory party would like to market
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themselves. Do you think that reputation has been permanently scuppered as well by events over
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the past year? Permanently scuppered is a very strong term and very few things are permanent in politics
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but it's certainly been dented. I think there's no doubt about that. We're at the end of party
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conference season. When you look at the party now, do you recognize
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it as the one that you were you know a part of and such a prominent part of for so many years Do you you still align yourself with that Would you vote conservative at the next election I am a conservative I will vote conservative at the next election I have been dismayed by the populist turn that my party took for a while
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I think we're back heading in the right direction now under the current leadership
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away from populism to taking tough decisions and planning for the longer term
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which is absolutely what the country needs. We're coming out of a period of significant trauma
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It was Brexit, then there was COVID, then there's been the oil price shock and the war in Ukraine
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All of these things have destabilized the situation for everybody. And what we need now is to get back on track with a clear narrative of where Britain's future lies
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how we're going to earn our living in the future. we want a prosperous country in which people have confidence about their own futures
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And to do that, we need to be able to show how the country is going to earn its living
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I mean, on the tough decisions, one thing that you were quite wedded to was obviously HS2
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your transport sector, I think, when that got the green light. Is that a tough decision you can back or is that one you think is short-sighted like many do
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I would have liked to have seen the project completed in full
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and I'm pretty confident that we will eventually see that project completed
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So I was disappointed that the government has cancelled the Birmingham to Manchester leg
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but the really important decision is to terminate the railway in Houston rather than an Old Oak Common
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So long as the Houston Old Oak Common link is built, then it will always be possible to add on the Manchester leg
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add on a Leeds leg in the future. And I think once we've got the railway up and running
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people will quickly see how valuable that will be for the economy
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And just to, I suppose, come on to the end point of that line, London as a hub, a financial hub at the moment
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do you feel positive about London and its state within the world
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Do you think businesses will want to come here and set up? Yeah, so I think London is still one of the best places in the world to do business
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not just financial services business, but the ecosystem in London, the fact that we've got this pluriculture
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It's not just about financial services or just about tech or just about creative
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We've got all these sectors cheap by jowl in what is the biggest city in Europe
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That isn't easily undermined by anybody else, whatever Mr Macron may occasionally think
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And in financial services, the ecosystem is very, very deep, very historic, embedded in the culture and it is about people
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and people, you know, it's popular to think that people just up and move around
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but actually people have roots. They have families, they have kids in school, they have relationships
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And there's a lot of people who've made their home in London, have made their business space in London
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They want to stay here. They desperately want to stay here. We just have to make sure that that is also a commercially sensible decision for them
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as well as an emotionally sensible one. So no copper move across the channel any time soon
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No, well, as you know, copper's business is mainly conducted over its Swiss platform
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but this is very much our headquarters. This is where we do our product development
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This is where we make our strategic decisions. And no, that will remain the case
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Lord Hammond. Thank you very much for joining us. I've been Charlie Conchie from Cityam. You can catch us online in the paper and on the app
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