Eyal Nachum, Bruc Bond’s fintech guru, is cautioning investors and clients in the United Kingdom against complacency regarding cross-border payments in a post-Brexit world.
While many of the fear inducing scenarios following the departure referendum have been prevented, it is far too early to relax entirely, as much uncertainty still abounds.
For the longest while the question of Brexit has been casting its shadow over the British economy. The tribulations seemed endless, with challenge after challenge coming up against the UK Government’s decision to follow the referendum result and leave the European Union. Up until the General Election only a few months ago, the question of “will they, or won’t they?” preoccupied minds and hearts all across the European continent and in the United Kingdom.
Now that it’s finally settled, and Britain is (or has) leaving the Union, the temptation is to sit back and relax, basking in the certainty of the post-Brexit regime. Doing so would be a mistake, says Eyal Nachum.
While certainty has its allure, many of the details of Britain’s post-Brexit existence are yet to be worked out. And the devil, as they say, lies in these gray details, agreed upon by negotiators behind closed doors. For now, and during the entire implementation period, EU derived laws and regulations will apply. Financial service companies, including London-based counterparts of Bruc Bond, can continue performing cross-border payments and operations much like they have done so far.
Moreover, as officials in the UK’s Financial Conduct Authority and the Bank of England rightfully proudly claim, they have undertaken a herculean effort to make sure that the financial services sector is one of the best prepared for Brexit and have look at regulation of bitcoin and cryptocurrencies too.
However, Eyal Nachum and his colleagues at Bruc Bond are still concerned that such measures are only temporary, as the withdrawal agreement’s implementation period might indeed come to a dramatic and swift end and the close of 2020.
If no final agreements are reached by then, and it is highly unlikely that they will be, and the implementation period is not extended, the stability of the financial services sector as a whole, and of cross-border operation in particular, cannot be guaranteed.
To be sure, financial services will be one of the main areas of negotiations in the coming year. The sector is far too important for the British economy too neglect, and London’s status as a global finance hub will mean that the EU has no choice but to engage seriously, but negotiations will surely be tense.
There are far too many stumbling blocks on the way to a mutually beneficial resolution.
Not least of these is the direct opposition between the positions taken by Johnson’s government and Brussels. The UK has categorically ruled out the possibility of staying the single market, while Brussels has ruled out sector-specific arrangements.
If this opposition is not untangled, it could have far reaching implications on cross-border operations, including financial services “passporting”. The consequences could be disastrous, warns Eyal Nachum.