One of the most interesting effects that Brexit has had on the global economy is related to bitcoin.

The unexpected decision by the United Kingdom to terminate its membership in the European Union has left this powerful economy crippled and uncertain. Investors are being very cautious around UK investments and assets, particularly with regard to the pound sterling and the consumer economy.

According to a recent research report issued by IG Markets, UK investors were surprised by the sharp decline of the British pound immediately after Brexit. If not for the Bank of England’s decision to leave rates unchanged, the pound sterling would have kept losing ground to the euro and even to the United States dollar. As a result, post-Brexit investors are trying to avoid risk and uncertainty.

IG Markets see investors looking to diversify their portfolios with alternative assets, specifically gold, silver and bitcoin. In fact, IG Markets called attention to the fact that bitcoin has already gained 55 percent in value on a year-to-date basis, and it could reach $900 in late 2016.

Bitcoin as a Flight to Yield Investment

Seeing a respected investment banking firm such as IF Markets mention bitcoin along with precious metals such as gold and silver is something new. Until a couple of years ago, bitcoin was seen as a subversive currency that was mostly in the purview of crypto-anarchists and dubious online marketplaces such as the defunct Silk Road.

These days, investors cannot deny that bitcoin is a bona fide currency for e-commerce, and it has also matured as an asset that can be considered a store of value. The emergence of reputable bitcoin exchanges such as Coinbase certainly helps, but there are even more implications to consider with regard to Brexit.

Bitcoin has developed into an asset with strong yield potential, which means that investors can flock to it in times of market uncertainty. Gone are the days when the value of bitcoin would go up or down a few hundred dollars in a few days. If anything, bitcoin is now behaving like a commodity; it has even become a forex currency pair of BTC/USD.

How Brexit Will Impact Bitcoin’s Future in the UK

In the aftermath of Brexit, one important economic aspect that UK voters failed to realize is the status of London as a major financial center on a level similar to Wall Street. The work of the Financial Conduct Authority (FCA), the principal government regulator, pleased EU investors to a great degree, which is why The City became the financial capital of Europe.

For bitcoin ventures that sought to gain a foothold in the lucrative EU market, having a presence in The City was a must; basically, if the FCA granted approval to a blockchain developer or bitcoin wallet provider to operate in London, the rest of the EU would easily follow suit.

Financial license portability and reciprocity are two very attractive benefits of EU membership. With the UK leaving this powerful block, the future of The City is up in the air. There may no longer be an incentive for bitcoin developers and service providers to seek financial licensing in London if it is not part of the EU. It would make more sense to set up shop in Frankfurt or even Amsterdam.

The success and prevalence of bitcoin in the UK will ultimately depend on how far removed from the EU British people would like to be.