BOE governor trashes crypto, stablecoins in favor of ‘enhanced digital money’

July 10, 2023 Coin Telegraph

A retail CBDC or “enhanced” digital money would support the singleness of money and settlement finality, Andrew Bailey said, but crypto isn’t money.

Andrew Bailey, a Bank of England (BOE) governor, delivered a speech July 10 in which he moved smoothly from the central bank’s efforts to control inflation and maintain public trust in financial institutions to why cryptocurrencies are not money. Instead of cryptocurrencies and stablecoins, he would prefer “enhanced digital money.”

The spate of bank failures in the United States and Switzerland earlier this year revealed issues of the singleness of money and settlement finality, Bailey said. Both cryptocurrencies and stablecoins fail basic tests of singleness and settlement finality, he said, without elaborating. “They are not money,” Bailey said. The passage of the Financial Services and Markets Act would bring stablecoins into line, however.

Bank of England Governor Andrew Bailey says inflation is likely to drop “markedly” this year and that the full impact of rate increases has yet to hit the economy https://t.co/kntdoEKYPr
— Bloomberg Economics (@economics) July 10, 2023

Digital money, as it already exists, “entirely held in IT systems,” could be enhanced to become “a unit of money to which there is the capability to attach a lot more executable actions, for instance, contingent actions in so-called smart contracts,” Bailey said.

A central bank digital currency (CBDC) would also be a form of enhanced digital money, Bailey said. “There is no reason that I can think of which makes well-designed enhanced digital money the sole preserve of central banks,” he added, but a CBDC would present distinct advantages:

“Our main motivation for a retail CBDC would be to promote the singleness of money by ensuring that the public always has the option of going into fully functional central bank money that can be used in their everyday lives.”

Bailey had a different view of wholesale CBDCs. The BOE has just upgraded its Real-Time Gross Settlement (RTGS) system. Bailey said:

“This puts us in a very strong position to deliver solutions which can integrate central bank digital money in RTGS with tokenized transactions. We think this is the fastest and most efficient route to take.”

That is without creating a wholesale CBDC, it seems. Bailey added that “cash is here to stay.”

Magazine: Crazy outcomes when current laws applied to NFTs and the metaverse

Bank of England Says Upcoming CBDC System Won’t Share Personal Data With Authorities

June 27, 2023 The Daily Hodl

Digital pound will be pseudonymous with a focus on privacy: BoE CBDC chief

June 27, 2023 Coin Telegraph

Bank of England

The underpinning technology for the U.K.’s CBDC could use an alternative to blockchain technology.

The Bank of England (BoE) has made significant developments in its central bank digital currency (CBDC) program. Tom Mutton, director of fintech at the BoE, recently shared insights on the privacy aspect of the CBDC and why the central bank might look for other options beyond blockchain as the underpinning technology.

In the interview, Mutton said that during a recent meeting of technologists hosted by the BoE to discuss digital pound design, there was a clear disagreement on which ledger should be used for the CBDC. Thus, the bank aims to trial multiple ledger technologies, including blockchain.

Dubbed Britcoin, the development plans for a digital pound were first proposed when the United Kingdom’s Treasury Department and the BoE established a joint task force to research a U.K. CBDC in April 2021. Later, in February 2023, the bank issued a consultancy paper outlining the design of the digital pound.

Currently, the BoE and His Majesty’s Treasury are seeking feedback from the stakeholders and technology experts on the proposed design of the CBDC. The feedback is open until June 30.

Mutton stated:

“We want to be compatible with distributed-ledger business models in the private sector, but we were not convinced that distributed ledgers offered more efficiency over conventional ledgers.”

Cointelegraph reached out to BoE to enquire about what other ledger technologies it was considering. However, the BoE did not respond by publication.

Apart from the discussions about ledger technology, Mutton also talked about the privacy aspect of the CBDC, claiming it would be focused on offering privacy to users and won’t collect personal data. He said the bank would focus on providing the infrastructure, while the private players would be responsible for the innovation.

“There will be no data shared with the Bank of England, we will know what transactions have happened but we will have no data on the individual who did it. While the wallet provider would have the user data but won’t have access to their transaction data.”

Mutton claimed the BoE or the government wouldn’t have access to any user data, and even the wallet providers with limited access to that data will need consent from the users regarding what data they can store. With a focus on retail, the BoE had stated previously that the digital pound could co-exist with private stablecoins.

Magazine: Best and worst countries for crypto taxes — plus crypto tax tips

BoE fintech head says crypto doesn’t ‘fulfill any of the functions of money’

May 9, 2023 Coin Telegraph

Bank of England

At a recent event, Tom Mutton, the Bank of England’s head of fintech, touted the privacy benefits of CBDCs while denouncing the anonymity of cryptocurrencies.

The Bank of England’s director of fintech, Tom Hutton, recently spoke out on the United Kingdom’s plans to institute a central bank digital currency (CBDC) at the Crypto and Digital Assets Summit in London.

LIVE: Crypto and Digital Assets Summit Day 1. Tune in to hear leaders from across the industry debate the trends that are shaping the future of Crypto: https://t.co/ZiWtmb5j5M

Follow the thread below for key highlights pic.twitter.com/dNxGemJGzf
— Financial Times Live (@ftlive) May 9, 2023

According to a report, Hutton’s talk focused on privacy and anonymity — concepts he says are at odds with each other regarding the Bank of England’s digital currency focus.

While describing the U.K.’s plans for a digital pound as only being viable if “it has the very highest standards of privacy,” Mutton explained such a product was never meant to feature anonymity:

“Privacy and anonymity are used synonymously in a way they shouldn’t be.”

Apparently referencing the potential for cryptocurrency to be used in the commission of criminal acts — something experts estimate accounts for only 0.10% to 0.15% of all cryptocurrency use — Mutton also mentioned that anonymity was “a public policy problem and something that should not be allowed to continue.”

In further comments, Mutton explained that the digital pound would not be interoperable with cryptocurrencies. His reasoning: They don’t “fulfill any of the functions of money.”

Mutton’s comments come less than a month after the Bank of England’s deputy governor, John Cunliffe, spoke at the Innovate Finance Global Summit in London.

During the April 17 event, Cunliffe tackled CBDCs and stablecoins, telling eventgoers the latter would “offer the possibility of greater efficiency and functionality in payments,” but that “it is extremely unlikely that any of the current offerings would meet the standards for robustness and uniformity we currently apply both to commercial bank money and to the existing payment systems.”

In reference to a national CBDC, Cunliffe said a digital pound is “likely to be needed if current trends in payments and money […] continue.”

The Bank of England has yet to announce when the digital pound could launch — or, indeed, whether it will at all. In February, the bank issued guidance suggesting, as Cunliffe recently reiterated, such a product might be needed in the future, but that it was “too early to decide” as of now.

Stablecoins at the Forefront of Developments in Tokenization of Money, Says Bank of England Deputy Governor

April 19, 2023 The Daily Hodl

Gold Slides on Higher US Treasury Yields, Dollar

April 19, 2023 Bitcoin.com

BIS, Bank of England conclude DLT settlements pilot

April 19, 2023 Coin Telegraph

Bank of England

The insights of Project Meridian would be used by the Bank of England in its real-time gross settlement system.

The Bank of England and the Bank for International Settlements (BIS) Innovation Hub London Center have tested a distributed ledger technology-powered settlements system between the institutions. The insights of the project will be used by the Bank of England in its real-time gross settlement (RTGS) system.

On April 19, BIS published a report about the joint pilot project with the Bank of England called Project Meridian. According to the 44-page document, the banks have successfully purchased houses in Wales and England through the synchronization network using distributed ledger technology (DLT).

As the report states, the messages sent between the synchronization network and RTGS system using APIs provide a generic interface that could be “relatively easily” extended to other asset classes, such as foreign exchange. This could reduce the time, costs and risks of transactions.

*The Synchronization system of Project Meridian. Source: BIS*

Project Meridian clearly aims to provide a settlement system for central bank digital currencies (CBDC). The report is unequivocal in citing the possible benefits for central banks:

“Synchronization can provide a catalyst for innovation in wholesale payments and support the emergence of new payments infrastructures that settle using central bank money.”

However, there are several reservations about the possible use of the system, concluded in the “Political and operational considerations” part of the report. For example, future network operators will have to think about the mechanics of identity verification. Also, the synchronization services would be restricted by existing RTGS operating hours at a time when many jurisdictions are considering extensions to the operating hours of their national payment infrastructures.

Implementing the system would raise several legal questions, such as the final point of irrevocability of the settlement, digital representation of asset ownership and the prevention of the arbitrary use of the clients’ funds by commercial banks before a transaction date.

In March, the BIS reported about the completion of Project Icebreaker, exploring international retail and remittance payments use cases for CBDCs with the central banks of Israel, Norway and Sweden. In October 2022, the bank reported that a CBDC pilot involving the central banks of Hong Kong, Thailand, China and the United Arab Emirates was “successful” after a month-long test facilitating $22 million in cross-border transactions.

Magazine: Are CBDCs kryptonite for crypto?

Bank of England preparing for greater role of tokenization in finance, official says

April 17, 2023 Coin Telegraph

Bank of England

BoE deputy governor Sir Jon Cunliffe looked at stablecoin, CBDC and other forms of tokenization taking hold in the modern economy in a speech on financial innovation.

Bank of England deputy governor Sir Jon Cunliffe spoke at the Innovative Finance Global Summit in London on April 17 about the development of tokenization. The UK’s central bank is currently exploring tokenization in bank money, non-bank money and central bank money and the ways tokenized assets will interact.

Stablecoins, Cunliffe said, “offer the possibility of greater efficiency and functionality in payments,” but “it is extremely unlikely that any of the current offerings would meet the standards for robustness and uniformity we currently apply both to commercial bank money and to the existing payment systems.” The central bank is planning to collaborate with the Financial Conduct Authority on regulation after the passage of the Financial Services and Markets Bill.

Tokenized bank deposits are “a much simpler proposition than non-bank stablecoins,” and may allow banks deposits “to compete better with non-bank payment coins.” Regulatory issues, such as deposit insurance and Anti-Money Laundering measures remain, however, as deposit tokens would settle without the involvement of central bank money, unlike current commercial bank settlements.

The @bankofengland's Jon Cunliffe outlines 4 areas where tokenisation of money is being explored: #stablecoins for payments, tokenisation of commercial bank deposits, issuance of a digital pound, and ensuring these new forms of money are robust & uniformhttps://t.co/DthyJrtVZ1
— Central Bank Payments News (@cbpaymentsnews) April 17, 2023

A UK central bank digital currency “is likely to be needed if current trends in payments and money […] continue.” A digital pound would play an anchoring role in the economy the way cash does now and would provide a wide range of innovators access to a platform. Machinery could be created to ensure that wholesale tokenized transactions could settle in central bank money thanks to a digital pound, again adding to financial stability, Cunliffe said.

Synchronizing tokenized transactions with the British central bank’s real time payment system will also be potentially possible with upgrades that are now underway, Cunliffe said. The United States Federal Reserve has recently announced the creation of FedNow, a new instant payment system.

Magazine: Starbucks joins NFT party, UK government seeks stablecoin regulations and Crypto Twitter rallies behind cancer fighter, Hodler’s Digest: Apr. 3-9

UK forms Bitcoin Policy org to boost BTC education and adoption

April 13, 2023 Coin Telegraph

Bank of England

A Bitcoin-only policy organization in the United Kingdom seeks to steer a course for greater levels of Bitcoin adoption.

God save our gracious coin, long live the coin. A team of entrepreneurs, environmentalists and Bitcoin (BTC) advocates have assembled to back Bitcoin in Britain.

The Bitcoin Policy U.K. (BPUK) unites stakeholders, policymakers, environmentalists, tax specialists, Bitcoin experts and miners to “Unlock the potential of Bitcoin” in Britain, and explore how the decentralized currency’s burgeoning industry could benefit U.K. households, businesses, and communities.

The BPUK’s primary objectives are to drive investment, both generate and prepare students for the Bitcoin jobs of the future, raise awareness and education, while also exploring the use of wasted and stranded energy resources for Bitcoin mining.

Head of policy, Freddie New, told Cointelegraph that “The genesis of this project was the Bitcoin Collective Conference in Edinburgh.” The Bitcoin Collective conference was the U.K.’s largest Bitcoin conference, taking place in the autumn 2022.

*Bitcoin advocates Natalie Brunell, Lawrence Lepard, Greg Foss and Jeff Booth on stage at the Bitcoin Collective in 2022. Source: Bitcoin Collective*

New told Cointelegraph via email that most of the team had been working on Bitcoin advocacy in one way or another before the conference, "But coming together like this will enable us to formalize these efforts and focus on three key related areas." He continued:

“Getting clear and correct information on Bitcoin to policymakers and regulators, highlighting the environmental and sustainability benefits of the mining industry, and collating and providing educational resources for the next generation of Bitcoiners.”

Some of the advisers and board members are familiar to Cointelegraph readers. Author and journalist DecentraSuze, whose son recently introduced Bitcoin to the classroom, is a director, while Jordan Walker, co-founder of the UK Bitcoin Collective, and Mark Morton are advisers. Morton's Bitcoin mining company, Scilling Digital Mining, was featured in a recent Cointelegraph mini-documentary:

Walker told Cointelegraph that the BPUK is an important piece of the collective puzzle to drive Bitcoin education in the U.K.:

"It’s time for the UK to step up when it comes to embracing new technologies such as Bitcoin otherwise we risk getting left behind."

New told Cointelegraph that the BPUK is not-for-profit. To operate, it hopes to raise funds through the community, tapping into the growing trend of funding projects with Satoshis, or small amounts of BTC, via the Lightning Network, a layer-2 instant payment solution built atop Bitcoin.

Part of the team’s mission is to locate and harness renewable, wasted, or stranded energy across the U.K., New explained.

“We're working […] To identify potential sites for sustainable mining, and our aim is to develop some small mining installations to use as 'proof of concept' sites.

He continued with the plan: "We can then invite British policymakers to these sites so they can see mines in action and hopefully understand more about the industry's potential to mitigate vented methane, provide demand response for renewable grids, or simply act as a customer for energy that is otherwise wasted.”

*The bagpiper procession that brought the Bitcoin Collective conference to a close. Source: YouTube*

The U.K. has burgeoning renewable energy sources but lacks in hash rate (a measure of the Bitcoin protocol’s security). According to the Cambridge Center for Alternative Finance, the U.K. supports 0.23% of the global monthly hash rate, compared to the U.S.'s 37.84%.

This is partly due to electricity costs in the U.K. exceeding that of the U.S. and Asia, but also due to Bitcoin mining awareness, or a lack thereof in the U.K. Moreover, legacy media platforms have taken aim at the Bitcoin mining industry in recent years — the Guardian critiqued Bitcoin as "digital beef" instead of "digital gold."

*A heat map of the monthly Bitcoin Mining hashrate. The U.K. is light orange, at 0.23%. Source: CCAF*

The BPUK highlights that in light of the U.K.’s departure from the European Union, it could develop a Bitcoin and cryptocurrency regime separate from that of MiCA in Europe. The European Parliamentary Committee on Markets in Crypto Assets (MiCA), may threaten Bitcoin mining on the continent.

BPUK cofounder, Krista Edmunds, took inspiration from El Salvador’s decision to adopt Bitcoin as legal tender in 2021. Edmunds explained:

"The U.K. has an immense opportunity to become one of the first jurisdictions globally to embrace Bitcoin. We have seen what is possible in El Salvador, which is experiencing huge gains due to its forward-thinking approach to Bitcoin. The U.K. can secure a similar competitive advantage, and we hope to support the British people in making that happen."

On the governmental side, the policy group will have an opportunity to educate and inform. Lisa Cameron, a Member of Parliament and Chairperson of The Crypto and Digital Assets All-Party Parliamentary Group (APPG), told Cointelegraph in an interview last year: “We are on a learning curve and it’s just very, very important because the U.K. government has a policy vision that the U.K. will become an international hub of cryptocurrency and digital assets.” She added that there was some confusion surrounding Bitcoin, CBDCs and cryptocurrency.

*Cointelegraph's Joe Hall speaks to MP Lisa Cameron in Edinburgh.*

As a Bitcoin-only organization, director New explains that, ultimately, the BPUK seeks to “make sure that Bitcoin is included in the government's proposals, if not at the front and center."

US explores additional bank support favoring First Republic’s benefit: Report

March 26, 2023 Coin Telegraph

Bank of Canada

Despite banking laws stating that remedies should not be aimed at benefiting a specific bank, this change could be structured “in a way to ensure” First Republic benefits, according to unnamed sources.

United States authorities are reportedly deliberating on "expanding" an emergency credit line for banks, which may provide First Republic Bank a time buffer to address balance sheet concerns, according to people familiar with the situation.

In a March 26 Bloomberg report citing unnamed sources, it was reported that U.S. officials are ruminating on what support, "if any," can be provided to First Republic, however an “expansion of the Federal Reserve’s offering” is one of the options being explored.

First Republic was reportedly deemed “stable enough to operate” by regulators without the need for an “immediate intervention,” as efforts are made by the bank in the meantime to “shore up its balance sheet.”

The sources noted that while the Fed’s liquidity offerings would be reportedly expanded in accordance with banking law, which stipulates that it must be “broadly based” and not aimed at benefiting a specific bank, they also warned that the alteration could be “made in a way” that ensures First Republic Bank benefits.

It was reported that despite First Republic facing structural challenges with its balance sheet, "the bank's deposits are stabilizing” and is not at risk of experiencing “the kind of sudden, severe run” that led regulators to close down Silicon Valley Bank. It noted:

“It has cash to meet client needs while it explores solutions, the people said. That includes $30 billion deposited by the nation’s largest banks this month.”

This comes after the Fed announced a plan on March 19 to strengthen liquidity conditions through “swap lines," which involve an agreement between two central banks to exchange currencies.

Coordinated central bank action to enhance the provision of U.S. dollar liquidity: https://t.co/Qs4cYY8BFO
— Federal Reserve (@federalreserve) March 19, 2023

"To improve the swap lines’ effectiveness in providing U.S. dollar funding, the central banks currently offering U.S. dollar operations have agreed to increase the frequency of seven-day maturity operations from weekly to daily," the Fed said in a statement

The swap line network – which involves the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, and the Swiss International Bank – commenced on March 20 and is set to run until at least April 30.

Bank of England

Share this video