“At 20 minutes to five, we can now say the decision taken in 1975 […] has been reversed by this referendum to Leave the EU: it is absolutely clear now that there is no way that the Remain side can win.” With these words, veteran broadcaster David Dimbleby – a mainstay of BBC Election Broadcasts for forty years – announced that Britain had voted to leave the EU, by a slim 4% lead, despite the predictions of Pollsters. Brexit is no longer a theoretical possibility: Britain enters a volatile time, Pound Sterling is in freefall. So what does this mean for the short and medium term future of digital currencies in the UK and the rest of Europe?
Read the full story below.
The British Prime Minister, David Cameron, is a politician of consensus. Unsatisfied with issues simmering on, his ‘One Nation’ conservative viewpoint brings head-on resolution of issues to the fore of Mr Cameron’s strategic repertoire. This was the rationale behind his decisions to trigger referendums on the Alternative Vote System, the Scottish Independence question, and, most recently, the United Kingdom’s membership of the European Union. Yet, with 309 counting areas declared out of 384, just before five o’clock in the morning, it became clear that the campaign to Remain in the EU lost out – by a margin of only around a million votes – and that Brexit, a word derisively invented by the press to describe a distant possibility, had become a stone-cold reality. Mr Cameron got resolution for this issue, but not in the fashion he might have hoped.
For the first time in modern history, a major economy has left an economic union. This is a seismic event in the political and economic history not just of Britain, nor Europe, but indeed the world. Markets across the globe – from the Nikkei to the FTSE – have contracted dramatically. The British Pound dropped from a high of $1.50 as polls closed down to $1.35 by the morning, with only a slight recovery as Mark Carney, the Governor of the Bank of England, reassured markets that the Bank has £250 billion ($341.1 billion US at time of writing) of liquidity on standby to bolster the vital financial services sector as the economy readjusts. Dr Carney is considered a safe pair of hands, given that his previous post as Governor of the Bank of Canada saw that country come out of the 2008 financial crisis relatively unscathed, but even he finds himself in uncharted territory.
In the short and medium term, economic uncertainty is about the only certainty remaining. Mr Cameron has effectively resigned, revealing he will be gone by his Conservative Party’s conference in October, triggering the long-winded election process to install a new leader of Britain’s largest party. The Chancellor, George Osborne, finds his tenure hanging by a thread. The leader of the opposition Labour Party, Jeremy Corbyn, has been accused of failing in his duty to ensure Labour voters supported Remain (the strongest Leave votes came in Labour strongholds in the North of England); two leading Labour MPs have motioned for a no-confidence vote, and Mr Corbyn has sacked his much-respected Shadow Foreign Secretary, Hilary Benn, for encouraging this insurrection. Hence, it is possible that both of Britain’s largest parties may soon be without leaders. There is even a risk that the upper echelons of the European Commission and European Parliament may find their positions untenable.
Even the future of the United Kingdom seems dangerously unclear. The First Minister of Scotland, Nicola Sturgeon, has suggested that – since leaving the EU represents a material change in Scotland’s circumstances, and that the majority of Scots backed the Remain Campaign – Scotland is very likely to seek a further referendum on independence, and that legislation is already being prepared to enable this. Northern Ireland also voted decisively to Remain in the EU; Martin McGuinness, the Deputy First Minister and Leader of the nationalist Irish republican party Sinn Fein, has echoed Ms Sturgeon’s sentiments, and has even called for a cross-border referendum on whether Northern Ireland should join the Irish Republic. This seems less likely – Sinn Fein and the Social Democratic Labour Party (the other Irish republican party in the Northern Ireland Assembly) are outnumbered by unionist parties, and the Irish Taoiseach (Prime Minister), Enda Kenny, has signalled his determination to work with the UK Government to maintain the status quo. But nevertheless, it seems there is a rough time ahead for Northern Ireland’s fragile peace agreements.
And yet more British Sovereign Territory stands at risk: Gibraltar, a small territory on the south coast of Spain renowned for its booming financial services industry, has been British for three centuries (and, opinion polls suggest, in excess of 90% of the population support this arrangement), but this has long been a sore point for the Spanish Government. Gibraltar itself voted with an overwhelming majority to Remain in the EU, partly due to concerns about Spanish ambitions; these concerns appear to be well founded, as within hours of the result being announced, Spain’s interim Foreign Minister, José Manuel García-Margallo, announced Spain’s intentions to seek joint sovereignty of the territory – a position dismissed by successive British Prime Ministers, but which may now find support in the European Union.
The EU also has a dramatic series of decisions to make: first, does the Commission decide to punish the UK, removing any chance of membership of the Common Market, as an example to the increasingly Eurosceptic fringe emerging in France, Spain, Italy and the Nordic Nations? This position has received high-profile support from leading lights in Europe: Jean-Claude Junker, President of the European Commission, and Donald Tusk, President of the European Council, both suggested that the exit arrangements should be swift even if this is ‘painful’, while Germany’s Foreign Minister, Frank-Walter Steinmeier, wants an example to be made of Britain. Yet, German Chancellor Angela Merkel has presented a calmer front, and could help shepherd Britain through easier, while the Irish Government has offered assistance to their close neighbours to help negotiations.
There are many such big questions, and they have huge implications for economics of all types. But the short term is not perhaps as dramatic; Article 50 of the Lisbon Treaty, the founding document of the expanded European Union, deals specifically with the withdrawal of members, mandating a two-year exit period, in which the future relationship between the UK and the EU would be negotiated. And this Article need not be put into play immediately – it is at the discretion of the Prime Minister to implement Article 50, and he has left the decisions about activating this Article to his successor. The sovereign view of the British People therefore is not an immediate break, but the start of an ongoing process.
Britain has been famously pro-digital currency. The opportunity has been seized upon through prudent regulation by the British Government, but this sector has benefitted from Britain’s relationship with the EU. As an access point to the Common Market, Britain has held a unique position. There has also been a disparity between the British and European stances – where Britain was enthusiastic, Europe was cool. But now the EU has lost its most pro-cryptocurrency member. The notably cautious German and regularly interventionist French governments are likely to push for further regulation of digital currencies, and such regulation is likely to be onerous.
But cryptocurrencies could see a boom in the UK in the short term: uncertainty is the catalyst to the search for alternatives. As Britain’s Pound Sterling is volatile, the markets will revert to the US Dollar or to Japanese Yen as a currency of reserve – but there is no such luxury open to the individual members of the public. Instead, the only reserve currency open to most of us are digital currencies; BitCoin, DNotes and others may see an increase in demand in Britain and Europe as people react to this uncertainty. In a world where savings deplete in value, small investments in digital currencies may represent an opportunity to cushion this blow.
And the mood in the UK seems to suggest that this is a golden opportunity for digital currencies. For many in the UK, fear is the overriding feeling following this referendum. Many have begun taking panic measures: the Irish Government has reported a spike in the number of UK residents seeking to take up their century-old right to claim an Irish passport, while mortgage companies are experiencing peak demand for fixed-rate fixed-term mortgage applications as Brits assess the impact of potential interest rate rises on their household finances. Many who supported Britain’s leaving the EU have now expressed dismay as the consequences of their actions become clear – one man, interviewed by the BBC, revealed that he was ‘sure [his] vote wouldn’t count’, and that he was now ‘worried for the future’. Research by the Daily Mail has suggested this sentiment is not uncommon. Many voted to leave the EU as a protest against bureaucracy and the ‘establishment’, not expecting the vote to genuinely swing in that direction.
As the dust settles, these voters are experiencing what the Mail calls ‘Bregret’.
Many of these people would benefit disproportionately from digital currencies. The profile of pro-Brexit voters utilised by many pollsters suggests that most are either older (up to 65% of over-50s might have voted for Brexit), with savings which are likely to be hit by this financial uncertainty, or people of lower incomes – the underbanked, and those poorly served by financial institutions, with poor access to easy credit, large debts, and vulnerability to interest rate changes. Both these groups are exactly who digital currencies should be targeting, as I have previously argued Viva La Revolucion: Cryptocurrencies As Agents Of Social Change.
No Breverse, but a need for Breconciliation
‘Bregret’ is an understandable position; many now are hoping for what might be called a ‘Breverse’ – a re-run of the referendum, in which Bregretters can put right their decision – and a petition currently standing at 2.5 million signatories has been promoted to that effect. UK Parliamentary rules mean that any petition with more than 100,000 signatures must be debated in the House of Commons, but the debate on this is likely to be short: the Prime Minister will tell us that, while he sympathises with the petitioners, the decision is made, and that there is no legal precedent for the re-run of a referendum; he will remind us that democracy sometimes ends up with decisions we don’t like – and which he doesn’t like either; and he will conclude by quoting Mr Junker, who has repeatedly told Britain that ‘Out is Out’.
Out is indeed out: there is no way back. The enormity of this decision is dawning on many here and around the world. And the view from the UK is one of elation for some and deep fear for others. And between the two, and especially on the part of the latter, resentments are forming. Old wounds are being opened up, and negativity is winning the day.
I have always been of the opinion that digital currencies work best as a supplement to strong nation-states and strong national economies. Cryptocurrencies also foster international collaboration and bring together diverse communities and individuals; as the UK’s 2016 CoinFest, which I attended in Manchester, demonstrated, the digital currency community is a microcosm of our world with the colour-contrast cranked up to eleven. With common goals and singular purpose, the people of the world unite together to make financial services more representative and easier to access, to make money work for the people who need it most, and to promote cohesion and wealth creation simultaneously.
And this is the key challenge for the UK in the coming weeks, months and years. Nigel Farage, a leading anti-EU voice, claims June 24th is the UK’s Independence Day. Lord Paddy Ashdown, former Leader of the Liberal Democrat Party, merely tweeted ‘God help our country’. On whichever side of the dichotomy one falls, it is clear that Britain is divided. A time of healing must be ushered in. In short, we need a Breconciliation.
Digital currencies may have an important role to play in this healing, an opportunity for ordinary folk to look after their own investments while the Pound declines. But the digital currency community can also help bridge divisions, reaching out to the poor and underbanked, and proving that a robust capitalist economy can improve the lot of regular people for whom the benefits of growth are the distant preserve of the rich and powerful. Despite many of them seeing themselves as outsiders, digital currency supporters must lend their voices and their assistance to the efforts to reunite this Kingdom and repair a fragmenting Europe. Division hurts us all; while splitting from the EU was the result of the referendum, for us here in the UK, it is what we do next which will define us, as a nation, as communities, and as individuals.
The decision is cast. Europe is wounded. Britain is divided. The world waits with bated breath.
Addendum: Since this article was written, 11 members of Mr Corbyn's Shadow Cabinet (i.e. almost half) have resigned in addition to Mr Benn's sacking, including the Shadow Scottish and Northern Irish Secretaries, the Shadow Attorney General and the Shadow Leader of the House of Commons. The no-confidence motion is to be debated on Tuesday 28th June, and seems likely to pass.