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UK to Cut Regulatory Red Tape to Boost Tech and Growth
Regulation | March 19, 2025
Image: Freepik/rawpixel.com
UK to Streamline Regulations to Spur Emerging Tech and Economic Growth, Offering Insights for Canada
Big news came out of the UK government on March 17 2025 for those in emerging tech and innovation. As part of the UK's blueprint for innovation, Sweeping changes are being made to its regulatory system, aiming to remove bureaucratic obstacles that have slowed economic growth, fast track innovation, and attract investment. The quarterback of this effort is a new Regulatory Innovation Office (RIO) that will ensure regulators focus on economic growth while keeping up with emerging technologies. The UK wants to flip the script away from excessive risk aversion and position regulation as a tool to drive progress in high impact growth sectors.
See: Lessons for Canada from Global Leaders in Regulation
For NCFA and its community of fintech, web3, alternative finance, and AI driven financial sectors this is an eye popping development since Canada faces many of the same regulatory challenges that have long frustrated the UK such as slow approvals, unclear pathways for innovative new business models, and a fragmented approach to oversight. If the UK's reforms succeed, they could provide a roadmap for Canada to follow.
Current Regulatory Approach is Too Costly, Complex, and Burdensome
The UK government has recognized that start-up firms and scale-ups operating in innovative and emerging tech sectors like fintech, AI and digital assets have struggled with slow approvals, excessive paperwork, and conflicting rules that create too much regulatory complexity and uncertainty, slowing growth and 'stifling progress and innovation'. Further, the regulatory cost has made the country less competitive and the current approach is too 'risk adverse'. A study was conducted showing the regulatory cost is equivalent to approx 2-3% of GDP.
Performance Targets and Pro-Innovation Stance for Regulators
The government has outlined their regulatory vision for addressing the challenges that is agile, proportionate and competitive including:
See: Innovative Approaches to Smarter Regulation
- Support growth – regulation should protect consumers while encouraging investment, competition, and innovation
- Be targeted and proportionate – focus on necessary rules, trusting responsible businesses instead of over-regulating
- Ensure transparency and predictability – provide stability and clear rules so businesses can plan with confidence
- Adapt to innovation – Keep pace with AI, automation, and emerging technologies to maintain a competitive edge
The new RIO sets out 3 specific action plans to achieve these goals of (1) reducing regulatory complexity and burden; (2) reducing regulatory uncertainty, and (3) challenging excessive risk aversion.
One of the most striking changes is the introduction of performance targets for regulators. Of course, regulators have goals today but the new approach means that regulators will now be measured on outcomes that prioritize economic growth alongside consumer protection and reduction of bureaucratic obstacles. The UK's new Chancellor Rachel Reeves has announced that senior execs from the 16 largest regulators including the Financial Conduct Authority (FCA) will have biannual performance reviews to assess their contributions to the plan and vision. This means the FCA and other key regulators will have to operate with greater transparency and agility, ensuring fintech startups don't face unnecessary roadblocks when launching new services.
See: The Crisis Canada and Fintech Can’t Afford to Waste
The UK is also pushing regulators to embrace a risk-balanced approach to decision-making (aka principles-based approach), so instead of an overly risk adverse system where regulators error on the side of caution, there is now a directive to encourage responsible innovation which is particularly relevant to sectors like AI powered credit models, decentralized finance, and blockchain payment systems where regulatory uncertainty has slowed progress. Under the new approach, regulators will need to provide clearer guidance on AI in lending and risk assessment, and in the web3 space, provide faster approvals for tokenized assets to ensure the UK remains competitive in the digital economy.
What This Means for Canada
Generally speaking, Canada struggles with many of the similar regulatory challenges as the UK, if not worse. From where we sit here in Canada, the UK has long been considered a progressive regulator if not a gold standard in regulating new technologies and novel models in financial technology in particular, so a similar approach could benefit Canada at a time when the country must strengthen its economic resilience and competitiveness, amidst President Trump's tariff-trade war and risks to Canada's sovereignty.
Does Canada have a an RIO?
In short, the national Canadian Securities Administrators (CSA) does not have a dedicated 'Regulatory Innovation Office' that is tasked to cut through red tape and bottlenecks while ensuring provincial regulators are accountable for economic growth, but the CSA supports financial innovation through it's Financial Innovation Hub (FinHub) which offers resources such as the CSA Collaboratory, a cohort-based testing environment for regulators and innovators to collaborate, such as this testing initiative on data portability.
See: UK Overhauls Payment Oversight – Should Canada Follow?
Additionally, various provincial regulators like the OSC, ASC, and BSCS have their own innovation related initiatives from sandboxes to innovation offices to foster a supportive environment, but none to our knowledge that issue and oversee performance targets for quick approvals, burden reduction, and contributions to economic growth.
Outlook
The UK's regulatory overhaul is a catalyst for change and ambitious plan in regulatory modernization. If it works, it could set an example for Canada and others on how to support growth without sacrificing oversight.
The key takeaway is simple and clear: Regulation shouldn't be a roadblock to innovation and economic progress. With the right approach, it can help drive it.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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