BIS, Bank of England conclude DLT settlements pilot

April 19, 2023 Coin Telegraph

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.

Several Major Central Banks Take Coordinated Action to Boost Liquidity Amidst Banking Crisis

March 20, 2023 Bitcoin.com

SVB’s UK arm issues 15M pounds in bonuses after symbolic bailout: Report

March 19, 2023 Coin Telegraph

Bank of England

Insider sources reportedly described the bonus pool as “modest,” adding that the stock held by senior execs had been “rendered worthless” following Silicon Valley Bank UK arm's "near-collapse.”

Silicon Valley Bank UK (SVB UK) has granted millions of pounds in employee bonuses, just days after it was rescued by global banking giant HSBC for just 1 British pound, according to unnamed sources.

In a March 18 Sky News report citing unnamed sources, it was reported that payouts to SVB UK staff and senior executives were signed off "earlier this week" by HSBC UK Bank – the institution which acquired SVB UK for 1 British pound ($1.22 USD) on March 13.

It was reportedly "unclear" how much had been awarded to SVB UK’s CEO, Erin Platts, "or her senior colleagues," however the sources described the bonus pool as “modest,” and said that it totalled “between £15m and £20m" (approximately $18.26 million and $24.35 million USD).

While the insiders reportedly noted that if SVB UK “not been acquired solvently,” the bonuses wouldn’t have “been paid this week,” one insider reportedly “pointed out” that the stock held by senior executives and other employees had been “rendered worthless” by SVB UK’s near-collapse.

Another insider reportedly added that the bonus payments were “a signal of HSBC’s confidence in the talent base” at SVB UK, and was to honor “previous agreed payments” in an effort to “retain key staff.”

SVB UK previously stated in a March 17 tweet that it was "delighted" to now be part of HSBC, after 14 years of supporting and "growing the UK's innovative economy."

With 14 years of supporting & growing the UK's innovation economy, @SVB_UK is delighted to now be part of @HSBC, joining a successful global organisation to fuel our client's growth and ours. #UKTech #SVBUK #Startups #HSBC https://t.co/MNUl57S33Z
— SVB UK (@SVB_UK) March 16, 2023

This comes after the Bank of England shut down the operations of SVB UK on March 10, stating that it had a “limited presence,” and no “critical functions” supporting the financial system.

The statement declared that SVB UK will “stop making payments or accepting deposits,” as the BoE intended to apply to the court to place SVB into a “Bank Insolvency Procedure.”

Meanwhile, SVB's United States banking arm has been taken into government ownership and its holding company, SVB Financial Group, filed for Chapter 11 bankruptcy protection on March 17, as it seeks buyers for its other assets.

SVB Group chief restructuring officer, William Kosturos, stated that the Chapter 11 process will allow SVB Financial Group to “preserve value as it evaluates strategic alternatives for its prized businesses and assets.”

Kosturos emphasized that SVB Capital and SVB Securities will continue to operate, led by their respective independent teams.

UK regulators moving “at pace” to deliver a plan for tech firms hurt by SVB collapse

March 12, 2023 Coin Telegraph

Bank of England

An emergency plan to rescue startups and tech companies affected by the Silicon Valley Bank collapse is underway in the United Kingdom.

A plan to rescue startups and tech companies affected by the Silicon Valley Bank collapse is underway in the United Kingdom, according to multiple reports on March 12. The emergency plan will include a cash lifeline to a number of businesses.

Prime Minister Rishi Sunak said the government is working "at pace" to deliver a plan in the coming hours that would secure "operational liquidity and cash-flow needs" for Silicon Valley Bank's UK clients. In a statement published today, the U.K. Treasury stated:

“We will bring forward immediate plans to ensure the short-term operational and cash flow needs of Silicon Valley Bank UK customers are able to be met.”

The plan aims to “avoid or minimize damage to some of our most promising companies.” The chancellor's update also noted that the government is "treating this issue as a high priority, with discussions between the Governor of the Bank of England, the Prime Minister and the Chancellor taking place over the weekend."

The Bank of England (BoE) halted operations of SVB branches in the U.K. (SVB U.K.) on March 10, stating that it has a “limited presence” in the U.K. and no “critical functions” supporting the financial system.

According to the BoE, a bank insolvency procedure would mean that “eligible depositors” are paid out by the Financial Services Compensation Scheme up to the “protected limit” of £85,000 (approximately $102,288) or up to £170,000 (approximately $204,577) for joint accounts, as “quickly” as possible.

Over 200 founders and CEOs of UK tech companies signed a letter on March 11 calling for government intervention. Addressed to the U.K. Chancellor Jeremy Hunt, the letter claims many fintech firms managed all of their banking operations through SVB, and will "therefore go into receivership imminently unless preventative action is taken".

Silicon Valley was shut down by California’s financial watchdog on March 10 after announcing efforts to raise $2.25 billion capital to shore up operations. The bank is one of the biggest lenders in the United States, providing banking services for over 40,000 small businesses and many crypto-friendly venture capital firms. According to a Castle Hill audit report, assets from Web3 venture capitalists totaled more than $6 billion at the bank, including $2.85 billion from Andreessen Horowitz, $1.72 billion from Paradigm and $560 million from Pantera Capital.

Bank of England Shuts Down Silicon Valley Bank’s UK Branch After US Regulators Close Parent Company

March 11, 2023 Bitcoin.com

UK banking regulator to propose crypto issuing, holding rules after Basel 3 finalized

February 27, 2023 Coin Telegraph

Bank of England

The Bank of England Prudential Regulatory Authority will facilitate international economic growth under the Financial Services and Markets bill now in Parliament.

The United Kingdom’s bank regulator, the Prudential Regulatory Authority (PRA), will propose rules for issuing and holding digital assets, Bank of England (BOE) executive director of the Prudential Policy Directorate Vicky Saporta said in a speech at the bank Feb. 27. The rules will be developed with consideration for Basel III rules and the Financial Services and Markets (FSM) bill now being considered by the Parliament.

The FSM bill, which had its second reading in the House of Lords in January, would give the PRA the new secondary objective of facilitating U.K. international economic growth. To this end, Saporta said, “PRA rule making can deliver three things: harness the UK’s strengths as a global financial centre, maintain trust in the UK as a place to do business, and tailor regulations to UK circumstances.” She added:

“We will also be proposing rules about issuing and holding digital assets.”

The BOE and PRA are working with six other agencies to create a “regulatory grid setting out our plans in one place,” Saporta said. That new framework will replace the “labyrinth” of regulations currently in force, many of which are European Union (EU) rules. The U.K. withdrew from the EU in 2020.

The PRA “will be consulting on an implementation” of the Basel 3.1 standards once they are finalized, Saporta said. Those standards would call for banks to limit their exposure to cryptocurrencies to 1% of their capital, with a 1,250% risk premium. The EU is considering similar legislation. Saporta said:

“I also believe that it is normally easier for internationally active firms to follow one global rulebook instead of having to meet the expense of adapting to a patchwork of local standards.”

In addition, the FSM would extend current BOE regulations for payment systems and e-money to stablecoins, and after consultations, the PRA intends that “new standards for PRA-regulated firms will be coherent with rules for other sectors,” Saporta noted.

Very irritating @bankofengland speech today from its executive director for prudential policy

Vicky Saporta asserts the BoE's new secondary objective will spur change.

She talks about changes BoE is implementing.

Never once explains how the former drives the latter
— Chris Giles (@ChrisGiles_) February 27, 2023

Market Strategist Michael Wilkerson Believes US Inflation Could Rise to 12% by Year-End Despite Predictions of Decrease

February 26, 2023 Bitcoin.com

Bank of England

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