UK To Explore Central Bank Digital Currency
Chancellor of the Exchequer Rishi Sunak announced the launch of new fintech taskforce to “coordinate exploratory work on a potential central bank digital currency,” led by the UK Treasury and Bank of England and established as part of the UK Government’s response to the Kalifa Review.
Speaking at Innovate Finance Global Summit, Sunak highlights that the Bank of England has published a new account policy, allowing new and innovative financial market infrastructure propositions. Alongside this, the chancellor promises a new financial market infrastructure sandbox for firms “innovating with new technologies like distributed ledger technologies.”
— Rishi Sunak (@RishiSunak) April 19, 2021
The UK Government also intend on consulting this summer on reforms to capital markets, such as removing double volume cap and share trading obligation, which will ensure that the UK “continues to have the highest possible regulatory standards, whilst improving our competitiveness, supporting economic growth, and making sure the rulebook is fair and proportionate.”
Further, Sunak also reveals that the UK Treasury will be setting out a detailed response to the Kalifa Review in a written statement to Parliament “shortly” as well as publishing plans on taking on the recommendations in Lord Hill listings review.
On the Kalifa Review, the chancellor highlights three steps that are to be taken: fintech visa reformation and support for skilled employees, the FCA’s commitment to a fintech scalebox and a new Centre for Finance, Innovation and Technology.
“First, I can confirm that we’re already reforming the visa system to help firms like yours, complement your domestic recruitment efforts with the best and most promising tech talent from around the world.“Second, if we want to support fintech businesses to scale up, we need to make sure that regulatory toolkit is there. So, we’re pleased to announce today that the Financial Conduct Authority has decided to take forward the idea of a regulatory scalebox, a package of measures to help fintech firms to grow.
“And I can commit today that will work with the fintech community to realise the idea of a new industry led Centre for Finance, Innovation and Technology to utilise and enhance fintech expertise across the United Kingdom’s nations and regions.”
We’ll work with the Fintech community to realise the idea of a new, industry-led Centre for Finance, Innovation and Technology, to utilise and enhance Fintech expertise across the UK’s countries and regions. https://t.co/wKxr9kJtCl #UKFW21 pic.twitter.com/7QoGO6yyqx
— Rishi Sunak (@RishiSunak) April 19, 2021
At this event part of UK Fintech Week, Sunak’s vision to enhance the UK’s competitive advantage in fintech, from regulatory reforms to help firms grow to a new taskforce to lead the UK’s work on a central bank digital currency, is evident.”Our vision is for a more open, greener, and more technologically advanced financial services sector.
We warmly welcome the Chancellor’s proposals to enhance the UK’s competitive advantage in #fintech.
We're looking forward to working with @TheFCA on the 2nd phase #DigitalSandbox to support UK fintech tackling sustainability & climate change challenges.https://t.co/DxN7lUTYtD https://t.co/0jws0hUFyv
— Catherine McGuinness (@City_McGuinness) April 19, 2021
The UK is already known for being at the forefront of innovation, but we need to go further. The steps I’ve outlined today, to boost growing fintechs, push the boundaries of digital finance and make our financial markets more efficient, will propel us forward. And if we can capture the extraordinary potential of technology, we’ll cement the UK’s position as the world’s pre-eminent financial centre,” Sunak outlines.
Source: HM Treasury
Bank of England statement on Central Bank Digital Currency
The Bank of England and HM Treasury have announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential UK CBDC. A CBDC would be a new form of digital money issued by the Bank of England and for use by households and businesses. It would exist alongside cash and bank deposits, rather than replacing them.
The Government and the Bank of England have not yet made a decision on whether to introduce a CBDC in the UK, and will engage widely with stakeholders on the benefits, risks and practicalities of doing so.The Taskforce aims to ensure a strategic approach is adopted between the UK authorities as they explore CBDC, in line with their statutory objectives, and to promote close coordination between them. The Taskforce will:
- Coordinate exploration of the objectives, use cases, opportunities and risks of a potential UK CBDC.
- Guide evaluation of the design features a CBDC must display to achieve our goals.
- Support a rigorous, coherent and comprehensive assessment of the overall case for a UK CBDC.
- Monitor international CBDC developments to ensure the UK remains at the forefront of global innovation.
The Taskforce will be co-chaired by Deputy Governor for Financial Stability at the Bank of England, Jon Cunliffe, and HM Treasury’s Director General of Financial Services, Katharine Braddick. As appropriate other UK authorities will be involved in the Taskforce.The Bank of England has also today announced the creation of the following:
- A CBDC Engagement Forum to engage senior stakeholders and gather strategic input on all non-technology aspects of CBDC. The Forum will have an important role in helping the Bank and HM Treasury understand the practical challenges of designing, implementing and operating a CBDC. It will consider issues such as – but not limited to – ‘use cases’ for CBDC, functional needs of CBDC users, roles of public and private sectors in a CBDC system, financial & digital inclusion considerations, and data & privacy implications. Members will be drawn from financial institutions, civil society groups, merchants, business users and consumers.
- A CBDC Technology Forum to engage stakeholders and gather input on all technology aspects of CBDC from a diverse cross-section of expertise and perspectives. The Forum will have an important role in helping the Bank to understand the technological challenges of designing, implementing and operating a CBDC. Members will be invited by the Bank and drawn from a range of financial institutions, academia, fintechs, infrastructure providers and technology firms.
The Bank of England has also announced it will establish a CBDC Unit. This new division of the Bank of England will lead its internal exploration around CBDC. It will also lead the Bank’s external engagement on CBDC, including with other UK and international authorities. The Deputy Governor for Financial Stability, Jon Cunliffe, will oversee the work of the CBDC Unit.
Source: The Bank of England
Fnality recognises a major market milestone
Bank of England publishes an omnibus accounts policy to enable innovative payment systems
The Chancellor of the Exchequer made an announcement as part of UK FinTech Week 2021, welcoming the Bank of England’s new omnibus account model, devised to allow new and innovative financial market infrastructures to access central bank settlement money.
Her Majesty’s Treasury and the Bank of England also issued a press release on the publication of this policy. Fnality International, a private sector initiative supported by 15 major financial institutions, is delighted to announce that it has already made an application and notes this major milestone on its journey to launch innovative DLT based payment systems, together comprising Fnality Global Payments.
Fnality started as the Utility Settlement Coin (USC) project in 2016. It is now in its fourth phase of launching an initial live payment system – the first Fnality Payment System – after establishing its design goal, confirming feasibility through R&D, and creating an investable proposition. Since the initiative’s initial phase, the goal has been to drive the global payments paradigm shift necessary to support a world of tokenised asset settlement.
This has been collaboratively driven by the Fnality team and the investor institutions, encompassing cutting edge technology combined with innovative legal and policy thinking. The result is a new design of distributed financial market infrastructure (dFMI) offering superior efficiency and market resilience.
Fnality sees this latest step by the Bank of England as an acknowledgement of the market need to respond to evolving technology, for greater efficiency, and to support growing industry adoption of tokenised cash and assets. Fnality expects to fully comply with the BoE policy in supporting extensive use cases in peer-to-peer settlement with a new Sterling Fnality Payment System, 100% backed by fiat currency funds held with the central bank.
Rhomaios Ram, Fnality CEO: “We are delighted that the Bank of England has published a formal policy statement outlining the omnibus account eligibility criteria for innovative payment systems like Fnality. This policy is a key enabler in delivering game changing use cases on our new payment system.”
Hyder Jaffrey, MD – Head of Principal Investments, UBS Investment Bank: “Having been involved from the start of the Fnality journey, it’s great to see the publication of this policy. It highlights the progressive and forward-thinking approach taken by the Bank of England to support innovation in global payments. This approach will enable us to develop new settlement models, bringing significant market benefits to all stakeholders.”
John Whelan, MD – Digital Investment Bank & Innovation, Banco Santander: “It is exciting to see this development from the Bank of England supporting the opportunity to use tokenised cash assets on next generation payment systems, enabling on-chain wholesale exchange of value.”
Andrea Melville, MD, Commercialisation & Propositions, Lloyds Banking Group: “As a British bank, we are pleased to see that the Bank of England is providing the markets with opportunities to deliver a new payment system supported by the latest technologies. This is an important milestone in the evolution of the financial services industry.”
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