WEBVTT - What’s A ‘Britcoin’? 0:00:00.920 --> 0:00:03.920 This is Bloomberg Crypto, a daily Bloomberg I Hood podcast, 0:00:04.120 --> 0:00:07.320 and I'm Philip Blogger Cranstar, Senior editor for Crypto at 0:00:07.320 --> 0:00:11.880 Bloomberg News. In today for Stacy Marie Ishmael. It is Wednesday, 0:00:12.039 --> 0:00:27.640 March the first. The Bank of England and the UK 0:00:27.720 --> 0:00:30.440 Treasury are moving forward with a plan to launch a 0:00:30.560 --> 0:00:34.440 digital currency. It's being called a CBDC, which is short 0:00:34.479 --> 0:00:40.199 for Central Bank Digital Currency and afflete nicknamed Britcoin, but 0:00:40.600 --> 0:00:43.800 some critics are calling it a solution in search of 0:00:43.840 --> 0:00:49.440 a problem, particularly given the strength of the UK's fintech industry. 0:00:50.120 --> 0:00:52.600 Here today to join me to talk about this is 0:00:52.600 --> 0:01:04.400 Bloomberg reporter Emmelinicole. Emily, It's nice to finally be here 0:01:04.920 --> 0:01:07.800 with you in the studio today. How are you? I'm good, Thanks, 0:01:07.840 --> 0:01:09.839 How are you? Are you enjoying London? I am enjoying 0:01:09.880 --> 0:01:12.040 London very much and rainy for your face, it's very 0:01:12.120 --> 0:01:15.680 nice and rainy. I'm told that the weather was beautiful yesterday. 0:01:16.240 --> 0:01:19.840 Today with my arrival, it is clearly changed. Perfect for 0:01:19.880 --> 0:01:22.800 our little conversation we're about to have absolutely and we're 0:01:22.840 --> 0:01:25.680 gonna be talking about Britcoin today. So let's just delve 0:01:25.840 --> 0:01:29.560 straight into it. Chawe, can you briefly explain to us 0:01:30.120 --> 0:01:35.080 what a CBDC is. So, a central bank digital currency 0:01:35.520 --> 0:01:39.600 is a form of government issued money that instead of 0:01:39.640 --> 0:01:43.320 being on a ledger in the Bank of England and 0:01:43.560 --> 0:01:48.200 on commercial banks own leasures, it's also backed on blockchain, 0:01:48.280 --> 0:01:51.400 so it's verifiable there is a token that transfers between 0:01:51.400 --> 0:01:53.600 this and that. At the minute, it's all a little 0:01:53.600 --> 0:01:55.920 bit more up in the air than that. Like, you know, 0:01:55.960 --> 0:01:58.000 if you get money sent to you in your bank 0:01:58.040 --> 0:02:00.400 account as a retail user, it looks like you had 0:02:00.800 --> 0:02:02.960 some numbers in one bank that went to some numbers 0:02:02.960 --> 0:02:05.000 and other banks. That's actually not quite how it works 0:02:05.080 --> 0:02:07.440 under the hood. But with CBDCs is a bit more 0:02:07.440 --> 0:02:11.440 of a blockchain transfer involved. And at a very basic level, 0:02:11.680 --> 0:02:14.320 what would be I mean, how would we compare to 0:02:14.440 --> 0:02:18.239 something like a debit card for everyday use, Probably is 0:02:18.280 --> 0:02:20.240 no different, I mean most of us, at least in 0:02:20.280 --> 0:02:23.799 the UK anyway, it's very like digital payments forward, and 0:02:23.840 --> 0:02:26.840 so spending on your debit card or spending a CBDC 0:02:27.080 --> 0:02:29.880 is is supposed to look and feel pretty much identical. 0:02:30.760 --> 0:02:32.600 The way that it's different and the reason why it's 0:02:32.600 --> 0:02:35.560 being developed is because at the minute, there are obviously 0:02:35.560 --> 0:02:37.840 people in crypto that are thinking of ways that they 0:02:37.840 --> 0:02:41.440 can use currency more fluidly, and so a CBDC, it 0:02:41.560 --> 0:02:43.919 is hoped, is a way that they can almost compete 0:02:43.919 --> 0:02:46.200 with the likes of Tether or Circle all these other 0:02:46.200 --> 0:02:49.920 private staple coins while having it still be government overseen 0:02:50.120 --> 0:02:53.440 bank money. So basically we've established it lives on a blockchain, 0:02:54.120 --> 0:02:58.280 but it's not really crypto. I mean, it's it's very 0:02:58.320 --> 0:03:02.880 distinct from what we were consider a crypto token. Yeah, 0:03:02.919 --> 0:03:05.760 it's not decentralized really in any way. It's still very 0:03:05.800 --> 0:03:09.320 much overseen by government. It's not anonymous either, so everybody 0:03:09.360 --> 0:03:10.960 knows who you are and where you're sending and how 0:03:11.040 --> 0:03:14.520 much you're sending it to. The only difference is that 0:03:14.560 --> 0:03:17.320 it will be I guess a little bit faster. Potentially, 0:03:17.600 --> 0:03:20.000 it may be more factable in terms of where you 0:03:20.040 --> 0:03:21.600 can send it and who you can send it to, 0:03:21.720 --> 0:03:24.480 because if while it's a compatible once they're developed, then 0:03:24.800 --> 0:03:26.520 that'll be a little bit easier than at the minute, 0:03:26.560 --> 0:03:28.560 where for example, you have to get someone's bank account 0:03:28.560 --> 0:03:30.720 details and have it all verified and all that kind 0:03:30.760 --> 0:03:34.320 of stuff. So it may be a solution to some 0:03:34.400 --> 0:03:36.720 of those issues. But as I said before, we're in 0:03:36.760 --> 0:03:40.400 a digital economy in the UK already, so a CBDC 0:03:40.560 --> 0:03:42.840 is something that is probably a little bit more helpful 0:03:42.840 --> 0:03:45.080 for those in less developed economies where the banking system 0:03:45.120 --> 0:03:47.600 is a little bit less advanced. This is the main 0:03:48.160 --> 0:03:50.640 objection here. You look at the former Bank of indiand 0:03:50.640 --> 0:03:54.320 Governor Irvin King calling it a solution in search of 0:03:54.320 --> 0:03:59.120 a problem, but simply creating a central bank digital currency. 0:04:00.000 --> 0:04:02.200 On the face of it, it's not obvious that it 0:04:02.360 --> 0:04:06.840 brings about the sort of transformation people often assume it 0:04:06.920 --> 0:04:11.040 must lead to. What do they mean when they say that, like, 0:04:11.360 --> 0:04:14.040 and this is not just We should be clear that 0:04:14.080 --> 0:04:16.280 this is not just in Britain, that this debate is 0:04:16.320 --> 0:04:20.919 going on. I mean, it's happening everywhere. But what is 0:04:21.000 --> 0:04:23.160 the point of view? How do you describe the point 0:04:23.200 --> 0:04:25.200 of view that this is a solution in search of 0:04:25.240 --> 0:04:28.080 a problem. So in the UK we have something called 0:04:28.120 --> 0:04:32.080 Real Time Growth Settlements RTGs. It's a very big system 0:04:32.120 --> 0:04:34.000 that the Bank has been working on for many many 0:04:34.080 --> 0:04:36.280 years and is actually currently in the process of quite 0:04:36.279 --> 0:04:39.799 of an expensive upgrade to that. And that's what enables 0:04:39.839 --> 0:04:43.080 things to payments to transfer pretty much immediately, Like if 0:04:43.080 --> 0:04:45.039 I were to send you money via bank transfer right 0:04:45.120 --> 0:04:48.039 now from UK bank to UK bank. It's almost instant. 0:04:48.320 --> 0:04:50.840 In other countries, even in the US, where you'd say 0:04:50.839 --> 0:04:53.320 the economy is pretty advanced, the banking system doesn't quite 0:04:53.360 --> 0:04:55.760 match up and it can still take several days. But 0:04:55.839 --> 0:04:57.640 in the UK anyway, we pretty much have that. And 0:04:57.680 --> 0:05:00.080 that's why others think of this as a solution and 0:05:00.160 --> 0:05:02.720 such of a problem, because that issue of instant payment 0:05:02.839 --> 0:05:07.920 is already solved somewhat. The reason why a CBDC may 0:05:07.920 --> 0:05:10.520 be useful in the eyes of skeptics because they see 0:05:10.560 --> 0:05:13.560 the bankers trying to compete with the world of crypto 0:05:13.720 --> 0:05:17.240 not get left behind. If other countries are also developing CBDCs, 0:05:17.680 --> 0:05:19.720 you know, they wonder if there's a digital yeah, or 0:05:19.760 --> 0:05:22.920 if there's a digital euro, perhaps a digital pound is 0:05:22.920 --> 0:05:24.880 required in order for us to be able to achieve 0:05:24.920 --> 0:05:29.480 proper conversion between those different economies. And the other thing is, 0:05:29.600 --> 0:05:32.919 as you already said, we have the E dollar. Well 0:05:33.120 --> 0:05:36.240 very early stages have talked about that. It's actually much 0:05:36.279 --> 0:05:38.200 further back than our so we're a bit more advanced 0:05:38.200 --> 0:05:41.520 on the yes exactly, we have the E one would 0:05:41.520 --> 0:05:46.080 be one that's very far ahead the NIRA in Nigeria, 0:05:46.839 --> 0:05:50.080 and we're seeing central banks around the world starting to 0:05:50.120 --> 0:05:53.680 tinker with these kinds of experiments. What is it? Is 0:05:53.720 --> 0:05:57.719 there anything about britcoin that stands out here? Which class 0:05:57.839 --> 0:06:00.840 of CBDCs does it belong to? So what we've been 0:06:00.839 --> 0:06:03.120 talking about over the last few weeks is mainly the 0:06:03.200 --> 0:06:05.880 proposals for a retail CBDC, so that's one to be 0:06:06.000 --> 0:06:08.960 used by U and me. There is also another conversation 0:06:09.040 --> 0:06:12.360 going on for a wholesale CBDC that would be a 0:06:12.400 --> 0:06:15.440 digital currency that would enable banks to transfer between each other, 0:06:15.560 --> 0:06:19.040 so it would help settle larger amounts of capsule between 0:06:19.080 --> 0:06:21.680 you know, JP Morgan and Gobin Sacks or Santander an 0:06:21.760 --> 0:06:24.480 HSBC and make that side of the system a little 0:06:24.480 --> 0:06:28.120 bit faster. There's more of an argument for a wholesale CBDC. 0:06:28.279 --> 0:06:31.640 Even the Bank em England Governor Andrew Bailey has said, 0:06:31.640 --> 0:06:33.680 you know, a whole sale CBDC has quite a few 0:06:33.680 --> 0:06:37.159 many uses and might actually be something that could really 0:06:37.200 --> 0:06:39.719 help improve the banking system in this country. But for 0:06:39.760 --> 0:06:41.880 a resale one, there's there's a little bit more of 0:06:41.920 --> 0:06:45.040 a limited use case. You know, people could could expect 0:06:45.080 --> 0:06:47.640 to be paid in a UK CBDC, they could want 0:06:47.640 --> 0:06:49.919 to pay their mortgage in it. But it really, at 0:06:50.000 --> 0:06:53.279 least in terms of what's're already out there, it's pretty 0:06:53.279 --> 0:06:55.320 similar to what we're used to and in some ways 0:06:55.360 --> 0:06:57.520 that's kind of important, right It needs to be similar 0:06:57.520 --> 0:07:00.240 because if the learning curve is too steep, then people 0:07:00.279 --> 0:07:02.840 want to use it at all. And we'll be right 0:07:02.880 --> 0:07:16.320 back for more with Bloomberg Crypto reporter Emmaly Nicol. And 0:07:16.400 --> 0:07:19.600 then there's also the proposal from the Bank am Inland 0:07:19.680 --> 0:07:23.800 to basically have a limit of how much you can hold. 0:07:24.080 --> 0:07:28.400 I believe it was ten thousand to twenty thousand pounds 0:07:28.560 --> 0:07:32.320 most Yes, between those two, what is that intended to 0:07:32.440 --> 0:07:35.880 cannot solve for? Is this also into you know, I 0:07:35.880 --> 0:07:38.360 imagine it has to do with the fear of sucking 0:07:38.720 --> 0:07:42.880 money out of the deposit system. What's the background of that? Yeah, 0:07:42.960 --> 0:07:46.000 I think initially, while a CBDC is still in its infancy, 0:07:46.040 --> 0:07:48.840 you wouldn't want to be able to put everything into it. 0:07:48.840 --> 0:07:50.720 It still needs to be tested, it still needs to 0:07:50.720 --> 0:07:52.480 be trialed to make sure that it works out in 0:07:52.520 --> 0:07:55.240 the open, and so that initial limit is something that 0:07:55.320 --> 0:07:57.440 helps banks to kind of maintain a bit of an 0:07:57.480 --> 0:08:01.160 understanding of exactly how a CBDC works, see how people 0:08:01.200 --> 0:08:04.160 are using it for several years before they then let 0:08:04.160 --> 0:08:07.040 it run wild and loose. One of the big concerns 0:08:07.040 --> 0:08:10.400 with digital currencies is always the idea of people not 0:08:10.440 --> 0:08:13.040 being able to track what it's being used for, money laundering, 0:08:13.040 --> 0:08:15.680 a list of finance. A UK CBDC should be able 0:08:15.720 --> 0:08:17.760 to counteract all of those things because they're not going 0:08:17.800 --> 0:08:19.920 to let anybody be private while they're using it. So 0:08:20.360 --> 0:08:22.080 ideally it should be the same as if you put 0:08:22.120 --> 0:08:23.720 money in a bank account, you're still going to have 0:08:23.760 --> 0:08:25.800 to tell the bank who you are. But there is 0:08:25.960 --> 0:08:28.480 obviously the concern that if a CBDC becomes something that 0:08:28.640 --> 0:08:32.439 is interchangeable with other digital currencies around the world, is 0:08:32.480 --> 0:08:36.000 interchangeable perhaps even with stable coins one day, that could 0:08:36.080 --> 0:08:39.439 lead to a Daisy chain of finance where then eventually 0:08:39.440 --> 0:08:42.640 you're not able to tell who somebody is. And there 0:08:42.880 --> 0:08:46.120 is there a debate in the UK about privacy when 0:08:46.120 --> 0:08:49.040 it comes to the development of cb and that the 0:08:49.080 --> 0:08:52.120 potential launch or bridcoin for sure, that is actually one 0:08:52.120 --> 0:08:55.680 of the biggest roadblocks to it, so the UK is 0:08:55.720 --> 0:08:59.760 not one to ever give up their individual privacy if 0:08:59.800 --> 0:09:02.240 they if they're going to avoid it. We had a 0:09:03.040 --> 0:09:05.599 legislative attempt a few years ago to set up a 0:09:05.679 --> 0:09:08.600 national Register of Identity for us all to have ID cards, 0:09:08.640 --> 0:09:11.240 something that's pretty common in some other countries but it's 0:09:11.280 --> 0:09:15.440 not a thing here and there was a very large 0:09:15.440 --> 0:09:18.120 public outcright to that. It didn't make it through our 0:09:18.160 --> 0:09:21.560 houses of Parliament because an is basically people didn't want 0:09:21.600 --> 0:09:23.760 the government having a register of who everybody is and 0:09:23.800 --> 0:09:27.640 where they live, and so with a CBDC that was 0:09:27.679 --> 0:09:29.760 one of the biggest concerns, so that we were giving 0:09:30.120 --> 0:09:32.559 a state institution, the Bank of England, the right to 0:09:32.600 --> 0:09:35.559 a repository of information about who everybody is, where they live, 0:09:35.600 --> 0:09:37.920 how much money they have. And that's one of the 0:09:38.000 --> 0:09:40.600 reasons why the commercial banks will be involved in this 0:09:40.640 --> 0:09:43.280 process because it keeps the Bank of England out of that. 0:09:43.320 --> 0:09:45.360 It doesn't let them see you know who you are. 0:09:45.400 --> 0:09:48.240 Everything is partially anonymized in that sense. The banks will know, 0:09:48.320 --> 0:09:51.520 but the Bank of England won't. If you look at 0:09:51.520 --> 0:09:54.120 the various levels of pushback from ranging from you know, 0:09:54.240 --> 0:09:57.480 looking at privacy, which to some extent, as you say, 0:09:57.720 --> 0:10:02.560 is being addressed, but also this idea that it's a 0:10:02.640 --> 0:10:04.920 solution in such of a a problem. As we talked about, 0:10:04.960 --> 0:10:07.640 what's the main marketing pitch, what's the boees and the 0:10:07.679 --> 0:10:10.599 government's pitch behind doing this. What are they trying to 0:10:10.640 --> 0:10:13.000 sell it on right now? Is it convenience? Is it 0:10:13.080 --> 0:10:16.280 a mix of different things? There's an element of the 0:10:16.320 --> 0:10:19.280 convenient side, right. They think that if everybody is currently 0:10:19.320 --> 0:10:21.880 finding stable coins nice and convenient, then they should find 0:10:21.880 --> 0:10:25.400 a digital pattern convenient too. There's a little bit of 0:10:25.400 --> 0:10:27.360 a chicken before the egg though with this right, stable 0:10:27.400 --> 0:10:29.600 coins still aren't that big. They're definitely not being used 0:10:29.600 --> 0:10:32.240 for everyday payments at present. The idea is that if 0:10:32.280 --> 0:10:34.200 crypto continues to grow at the level it is, and 0:10:34.240 --> 0:10:36.520 that is a possible future, that we will use stable 0:10:36.559 --> 0:10:38.720 coins for payments one day. And this is the Bank 0:10:38.720 --> 0:10:40.480 of eng Them wanting to say we're not going to 0:10:40.480 --> 0:10:43.040 get left behind with that. Even this, We started talking 0:10:43.040 --> 0:10:46.640 about UKCBDC several years ago and we weren't expected to 0:10:46.720 --> 0:10:49.440 even see anything like a CBDC in our hands to 0:10:49.520 --> 0:10:52.200 be used for at least the second half of this decade. 0:10:52.480 --> 0:10:55.440 And it's interesting that you mentioned stable coins, because you'd 0:10:55.440 --> 0:10:58.440 be hard pressed to find a central banker these days 0:10:58.480 --> 0:11:02.360 who loves stable coins, wouldn't you. I mean, giving what's 0:11:02.360 --> 0:11:05.000 happened the last year or so, the regular reaction that 0:11:05.000 --> 0:11:08.280 we've seen in the US. What is the regulatory view 0:11:08.360 --> 0:11:11.760 on stable coins right how would you describe it right now? Negative? 0:11:13.360 --> 0:11:18.040 Right now? Several big regulators, global bodies to national bodies 0:11:18.040 --> 0:11:21.160 alike have all said that no current stable coin it 0:11:21.200 --> 0:11:23.480 meets any of the existing standards that are out there 0:11:23.640 --> 0:11:25.920 a form of digital money, they would not be able 0:11:26.000 --> 0:11:29.000 to meet the parameters of emoney regimes in the UK, 0:11:29.120 --> 0:11:30.720 which is the thing they will have to meet in 0:11:30.720 --> 0:11:33.360 a few years time when that becomes law. And that 0:11:33.760 --> 0:11:35.760 is a big problem for stable coin issuers because if 0:11:35.760 --> 0:11:38.040 the pitch is that they want to become basically a 0:11:38.080 --> 0:11:40.760 digital pound, but without the Bank of England, they're going 0:11:40.800 --> 0:11:43.320 to need to meet these rules. Governments are pretty quickly 0:11:43.360 --> 0:11:45.800 trying to put regimes in place to put parameters around 0:11:45.800 --> 0:11:48.520 how stable coins are you used, how even the wallets 0:11:48.559 --> 0:11:50.559 are able to be used. Those who would store them 0:11:50.559 --> 0:11:53.680 would need to be registered with regulators too, and so 0:11:54.120 --> 0:11:56.560 a CBDC is essentially trying to compete with those in 0:11:56.600 --> 0:11:59.280 a way that will be regulated, will be safe to 0:11:59.320 --> 0:12:02.800 some extent. Safe assending is and would basically get ahead 0:12:02.800 --> 0:12:04.760 of stable coins before they can get in there first. 0:12:06.720 --> 0:12:10.480 So work is proceeding, we're moving ahead, but what does 0:12:10.480 --> 0:12:14.160 the timetable look right now? Like it's several years at least. 0:12:13.880 --> 0:12:16.280 I don't know if we have a specific date really, 0:12:16.280 --> 0:12:18.200 but it's definitely not imminent. I mean we're still at 0:12:18.200 --> 0:12:21.360 the stages where we're having to engage with various parties 0:12:21.400 --> 0:12:25.160 to decide exactly how each thing would look. This is 0:12:25.360 --> 0:12:27.680 this consultation that's come out from the Bank of England 0:12:27.679 --> 0:12:29.560 in twenty twenty three is kind of the first real 0:12:29.559 --> 0:12:31.640 framework that we've had from them in terms of what 0:12:31.760 --> 0:12:35.040 exactly this might look like, things the specifics of stuff 0:12:35.040 --> 0:12:37.840 like you know, twenty thousand pound limits. But there are 0:12:37.880 --> 0:12:42.240 still engagement forums happening every so often with different parties 0:12:42.600 --> 0:12:45.840 from the banking sectors to finance sectors, technology sectors to 0:12:45.840 --> 0:12:48.320 inform the Bank of Bing's work on that we haven't 0:12:48.400 --> 0:12:50.360 yet decided. For example, if the Bank and will be 0:12:50.360 --> 0:12:52.360 building its own blockchain to make this all happen on 0:12:52.400 --> 0:12:54.280 if it will license that. There are banks out there 0:12:54.280 --> 0:12:57.200 that have already developed into bank assesslement blockchains like JP Morgan. 0:12:57.600 --> 0:13:01.760 So those are all options. So in some stable coins 0:13:01.800 --> 0:13:04.960 are probably somewhere in our future. We don't quite know when, 0:13:05.200 --> 0:13:08.439 and we don't quite know yet how they will look, 0:13:08.480 --> 0:13:11.280 taste and fail. Yeah, but the government's a certainly worried, 0:13:11.280 --> 0:13:16.000 and that's why we're building a chout. Thank you, Emony. Thanks. 0:13:17.280 --> 0:13:20.880 That was Bloomberg reporter Emily Hall. You can find more 0:13:21.080 --> 0:13:24.199 of her reporting on the Bloomberg terminal and on Bloomberg 0:13:24.240 --> 0:13:26.679 dot com. For more, be sure to check out our 0:13:26.760 --> 0:13:37.120 twice weekly newsletter, Bloomberg Crypto. This is Bloomberg Crypto, a 0:13:37.240 --> 0:13:41.800 daily podcast from Bloomberg and iHeartRadio. For more shows from iHeartRadio, 0:13:42.040 --> 0:13:45.560 visit the iHeartRadio app, Apple Podcasts, or wherever you get 0:13:45.600 --> 0:13:49.440 your podcasts. Send us your comments, questions or suggestions for 0:13:49.480 --> 0:13:55.720 the show to Crypto at Bloomberg dot net. The supervising 0:13:55.720 --> 0:13:59.520 producer of Bloomberg Crypto is Vicky Vergelina. Our senior producer 0:13:59.559 --> 0:14:03.480 is Janet Babin. Our producers are Mohammed Farouk and Sharon Barrero. 0:14:03.960 --> 0:14:06.800 Our associate producers are Ty Butler and Moses on Them 0:14:07.800 --> 0:14:11.760 Desta wonder At is our engineer. Original music by Leo Sidron. 0:14:13.160 --> 0:14:15.600 I'm Stacy Mariaschmaal. We'll be back tomorrow.