Britain’s Brexit wish comes true, will Blockchain technology stand out?

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British Flag and Cryptocurrencies (Source: insidebitcoins.com)

Original Article from: “TokenRolls Research Institute” and has been authorized for sharing.

Features: Brexit wishes come true, will Bitcoin be skyrocketing?

On January 29, the European Parliament approved the Brexit Deal. The UK will begin an 11-month “Brexit transition period” from February 1, 2020. Negotiations and legislations on new trade relationships, defense cooperations, immigration, and border control issues should be decided. Britain’s departure from the European Union pertains to “Brexit Deal”, and its impact on itself and the global economy is one of the less important in the Bank of England’s prediction of various possible scenarios. Despite the “orderly Brexit” of the United Kingdom, the European financial order may still be reshaped, and opportunities will emerge for digital tokens and the blockchain economy.

At 11 p.m. GMT on January 31, 2020, Britain officially left the European Union after 47 years, putting an end to Britain’s three-year Brexit process. This Brexit drama has finally come to an end. On the eve of Brexit, the pound and gold price increased, and Bitcoin, which is known as “digital gold”, is constantly breaking new highs for the year. What impact will Brexit have on digital tokens and blockchain? Will Bitcoin skyrocket all the way?

There’s no turning back, 11-month of Brexit transition period to ensure stability

Prime minister Boris Johnson addressed that, for many people, this is an astonishing moment of hope, a moment they thought would never come, this is not an end but a beginning. Brexit supporters lit fireworks in many places of the UK, and the Brexit Party leader Nigel Farage described Britain’s departure from the EU as “the greatest moment in the modern history of our great nation”, “we have passed the irreversible moment, there is no turning back.”

On the other hand, People who wished Britain to remain in the EU held candlelight vigils as their “mourning” over Brexit. A video was projected on the white cliffs off the coast of Dover, facing the European continent. The video was a WWII veteran’s nostalgia for the European Union. The video ended with the stars on the EU flag slowly fading away, leaving only one star symbolizing Britain. And accompanied by the text: “This is our star, look after it for us.”

On January 29, the European Parliament approved the Brexit Deal. The UK will begin an 11-month “Brexit transition period” from February 1. Negotiations and legislations on new trade relationships, defense cooperation, immigration, and border control issues should be put to an end. Britain has embarked on a very different path, withdrawing itself from a political and legal framework that has been in use for forty years.

European financial reshuffles, will blockchain technology and cryptocurrencies stand out from this?

Britain’s ultimate Brexit effects on Bitcoin, gold and other safe-haven assets are less than expected. The impact of Brexit on digital tokens such as Bitcoin has two aspects. One is that the economic growth of the United Kingdom and the EU member states has fallen, and the devaluation of the currency has caused investors to flock to the digital token market. Second is that Britain separated itself from the already written EU regulatory framework for cryptocurrency and of a new regulatory system’s establishment will increase transaction friction costs for the UK crypto investors.

Britain’s departure from the European Union is based on a Brexit deal, which has a small impact on itself and the global economy. The price of the British pound against the US dollar rose by 100 basis points after the announcement of Brexit. The Bank of England has analyzed the impact of Brexit on the UK economy in two scenarios: 1. The UK maintains an economic partnership with the EU; 2. No-deal and no-transition period Brexit. The Bank of England believes that Brexit will affect residents’ income and consumption, and corporate investment will be restrained by economic uncertainty. The Bank of England predicts that under the circumstances of no-deal Brexit, the UK’s gross domestic product (GDP) will fall by 5.5% to 8% compared to the end of 2018, and its impact is as significant as an economic crisis; while maintaining economic partnership with the EU, UK GDP will change by approximately -0.75% to 1.3% over the next five years.

Chart 1: Pound/US Dollar trend in the past six months (Source: Yahoo Finance)

Despite the “orderly Brexit” of the United Kingdom, the European financial order may still be reshaped, and opportunities will emerge for digital tokens and the blockchain ecosystems.

First, in the process of Brexit, in order to deal with the risk of a no-deal Brexit, most foreign financial institutions that will be established in London will follow the principle of “highest efficiency and lowest cost” and take precautionary measures to transfer risks. According to European Central Bank statistics, as of October 2019, 24 banks, including Citibank, Morgan Stanley, JP Morgan, and Goldman Sachs Group, have transferred related businesses from London to the Eurozone, involving assets of up to 1.3 trillion euros.

Second, European financial regulation may be complicated. Financial supervision and laws between the UK and the EU will undergo great changes once Britain leaves the EU with no deal, and a large number of financial business contracts will be effected continuously. Major European cities may start a new round of competition for financial centers, the financial markets will inevitably fluctuate sharply.

In this context, blockchain technology, with its distributed, high-efficiency, low-cost, and tamper-proof characteristics, will stand out and can potentially replace traditional financial institutions in the fields of international trade, bond issuance, and corporate financing. As “digital gold”, Bitcoin will attract a portion of the hedge funds from institutional investors. The attraction will not only trend towards Bitcoin but other outstanding cryptocurrency projects as well!

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Powering Decentralized Commerce | A Public Blockchain For a New World of DApps, Web 3.0 and Finance

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