Haydn Jones, director and senior specialist of Blockchain Market at PwC UK, shared with VIR’s Luu Huong how this trend could broaden access to financial services and some suggestions to build more transparent cross-border transactions, as discussed at the PwC workshop “Cryptocurrency and its Impact to Businesses” hosted in Hanoi last week.

Haydn Jones, director and senior specialist of Blockchain Market at PwC UK

Could you provide some highlights from the PwC Global CBDC (central bank digital currency) Index 2022?

The headline message is that adoption is a political decision. A 2021 survey from the Bank for International Settlements of central banks found that 86 per cent are actively researching the potential for CBDCs, 60 per cent were experimenting with the tech, and 14 per cent were deploying pilot projects.

So, if you look at the different jurisdictions, they all have a specific driver, whether it’s financial inclusion, a drive towards digitisation, reasons to combating financial crime, or creating a currency to represent your state. Furthermore, we believe that the success of some CBDC would promote other central banks to follow, particularly in countries where financial inclusion is one of the key desired outcomes.

What are the potential emerging trends and derivatives of cryptocurrency and virtual assets in the coming time?

There are 21,000 cryptocurrencies as of September this year. So, that amount has pretty much doubled from its very early beginning. Each of those cryptocurrencies has its own specific use case. And most of them are based on a blockchain. We need to see better levels of adoption and understanding from an enterprise level before we can really see a higher level of adoption across industry more generally.

I think it’s more about using blockchain technology to actually support industry with problems such as sustainability and provenance, with the commercial aspect being complemented by the central banks across the globe, digital currencies, and then also stablecoins.

It might be too early to attach products to cryptocurrencies. I think we need to see more adoption of CBDCs.

There are both positive and negative effects associated with the use of cryptocurrency and crypto assets.

In what ways do you think it will affect economies and businesses?

Let’s think about the cost and benefit. For example, if I have a contract with a business and deliver goods upon their request, but don’t get paid immediately until the next 30 days or 50 days, that is a funding cost that I have to cover. With this disruptive technology, we can create smart contracts. That means when I deliver goods or services, I can get paid immediately.

Vietnam’s GDP is around more than $362 billion in 2021. Of that, if we assume roughly between 5 and 10 per cent was spent on payment fees, and other transaction costs between different parties, that is a huge opportunity to save money in an economy.

However, if we can automate those payments, that is a percentage of Vietnam’s GDP is the money we can save for the country.

The efficiency of this technology boasts a vast potential for our economy if we use it properly.

What do you consider to be the most difficult challenges that this industry is now facing?

From our assessment, the most challenging obstacle is the insufficient understanding of crypto assets in our society. Many people still don’t fully understand how this crypto technology works. Other challenges are the awareness of its implications to the businesses such as combating the money laundering and terrorist financing – that’s all about understanding and awareness.

We need to have a full understanding of how the threats can be combated, then we can prevent it. Regulators have an important role in terms of creating the guardrails, and the safety perimeter to protect us from terrorist financing and money laundering, as well as other financial crimes. Because it is an extremely powerful technology, but only if it is properly understood and regulated.

Cryptocurrency legislation is always shifting, and it may be challenging to keep up with the latest legal framework developments throughout the different countries.

Could you share your experience with crypto regulations in the United Kingdom?

In the UK, if you’re an issuer, a custodian, a wallet provider, an exchange, or a crypto ATM operator, you need a licence from the Financial Conduct Authority. You must go through a very rigorous application process where you have to describe your business plan, marketing plan, the internal control, governance framework, and budget.

Furthermore, not only you must describe your ultimate beneficial owners and a number of other factors, but you also have to demonstrate to the regulator that you’ve got solid a robust internal control framework for anti-money laundering. Then you could undertake an effective client onboarding process. You can rate the risk profile of your clients on all of those factors, and the regulator takes this into account to decide whether they want to grant you a licence or not.

What is your suggestion for more transparent and secured cross-border cryptocurrency transactions across the globe, which will combat global criminal activities?

The Financial Action Task Force has recommended that the travel rule, which is to guard against money laundering and other illegal actions, is to be implemented for virtual asset service providers, including exchanges, banks, wallet providers, and other financial institutions to share certain information about the recipient and the beneficiary for cryptocurrency transactions over $1,000 globally.

When we have a crypto entity that has the travel rule applied, we can see the name of the sender, the receiver, as well as the value of the transaction. It is a very strong starting measure that we can put in place to help combat financial crimes.

The travel rule marks a major change when it comes to virtual assets and may fundamentally alter how virtual asset service providers operate in the future.

Nowadays, there are many central banks across the globe that have studied and already launched the cryptocurrencies. What’s your view on the legal framework?

CBDCs have been widely discussed in the media for a number of years, with some countries having already launched them, and others announcing their intention to do so. The legal framework will be very much the same, to some extent, requiring discussion and evaluation.

Interestingly, the UK’s Law Commission has just published a consultation which is more than 500 pages long, focusing on reforming the law to ensure that the law is capable of accommodating digital assets in a way which allows the possibilities of this type of technology to flourish

Particularly, this consultation paper proposes the digital assets should be recognised as a new form of personal property. Because the digital assets are not tangible, some digital assets have many different features to traditional physical assets and to other intangible things that can attract property rights. Due to its unique qualities and features, many digital assets do not fit easily into traditionally recognised personal property law categories. There is an expectation that the law would have to change to support digital currencies issued by a central bank, but also more broadly, in relation to digital assets.

This new approach will be the baseline for the future legal treatments of digital assets, and when paired with the inherent flexibility of British law, it strengthens the appeal of the UK as a destination for digital asset firms.

How long have you been working at PwC, and what brought you to work in this digital asset industry?

Overall, I have over 20 years of commercial, operational, and transformation experience working for retail and investment banks, a central bank, a regulator, a global management consultancy firm, and a Japanese technology company.

I’ve been working with PwC probably for about five years in different relationships. I used to be an engineer and a lawyer. I always like fixing things and solving complex problems. And I’ve always been fascinated by the innovative technology which can solve emerging problems and raise the living standards of millions of people. And for me, I think that’s hugely powerful and meaningful.