CBDCs: Digital Pound Foundation to Seek Help From Crypto Firms
A number of crypto industry giants have launched the Digital Pound Foundation (DPF) as an independent non-profit organization that seeks to promote a digital money ecosystem in the UK. The organization would collaborate with the UK government in the investigation and implementation of a digital pound.
Digital Pound Foundation to Draw on Experience of Crypto Firms
The Digital Pound Foundation, chaired by Jeremy Wilson, former vice-chairman of Barclays Bank, believes the UK needs to adopt a Central Bank Digital Currency (CBDC) to bolster its transition to an “innovative, inclusive digital economy and society.”
The UK has been one of the most advanced FinTech hubs in the world over the last decade or so. By 2019 the UK’s fintech sector had generated £11 billion in revenue. Moreover, the UK is home to over 44% of European FinTech firms valued at over $1 billion.
However, the foundation argues that the UK needs a digital pound to be able to preserve its leading position in FinTech. The foundation claims it aims to push for an “inclusive, well-regulated, secure and transparent ecosystem that encompasses both CBDCs and privately-issued forms of digital money.”
Back in May, the Bank of England (BoE) announced it will be exploring the use-cases of a CBDC. Before that, the Bank of England, in coordination with HM Treasury, launched a CBDC Taskforce to investigate the potential of a state-backed digital currency.
Nevertheless, the foundation ostensibly aims to push for an ecosystem where both Stablecoins and CBDCs will be able to coexist. If this happens, the crypto ecosystem in the UK may thrive.
“Technology is transforming human interaction and money must adapt to that. The world has become a global laboratory realising the benefits of a new form of money. The social ramifications of this shift will affect everyone. The Digital Pound Foundation seeks to support the UK in bringing that about for the benefit of all.”
Numerous crypto heavyweights are backing the foundation, including Accenture, Avalanche, Billon Group, CGI Group, Electroneum, Quant, and Ripple.
UK’s Approach to CBDCs Could Differ From US and China
The Digital Pound Foundation wants to make sure the UK does not take a hostile approach towards the emerging digital money ecosystem — potentially marking a departure from the hostile strategy seen in China and lack of clarity in the US.
In the midst of its rigorous crackdown on crypto mining, China also attacked stablecoins. In early July, China’s central bank (PBoC) warned that stablecoins pose serious risks to global financial systems. The country also unveiled that it has taken measures to limit the expansion of stablecoins in the country.
Arguably, China regards stablecoins as a potential competitor to its digital yuan project, which has been used by 139 million people and is preparing for a final roll-out.
In the US, officials have been recently scrutinizing stablecoins over their largely unregulated nature. In late July, Treasury Secretary Janet Yellen said that stablecoins should be “quickly” regulated. Later in September, Jerome Powell, the Fed Chair, said “you wouldn’t need stablecoins, you wouldn’t need cryptocurrencies, if you had a digital U.S. currency.”
However, he later made it clear that there is no intention of a ban, rather he is just pushing for regulations. He said:
“…if they’re going to be a significant part of the payments universe…then we need an appropriate framework, which frankly we don’t have.”
Aside from stablecoins, the regulatory bodies in the US have also been unfriendly to some crypto firms. For instance, the SEC warned it would sue Coinbase if it launches its Lend program, without much detailing and reasoning, Coinbase claimed.
Nevertheless, in Europe, Benoît Coeuré, a former member of the European Central Bank’s (ECB) executive board, has asked officials to act fast and regulate stablecoins. Coeuré also warned that stablecoins pose a threat to the banking system. He said:
“[Central banks] have a job to do — delivering price stability and financial stability — and they must retain their ability to do it. [They] have to act while the current system is still in place — and to act now.”
Nevertheless, contrary to other jurisdictions, if the UK chooses to cooperate with the Digital Pound Foundation, it could not only avoid damaging its fragile crypto ecosystem but could help it establish its leading position in FinTech before Brexit.
Do you think the UK will become the next crypto hub if it cooperates with the foundation? Let us know in the comments below.