Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I Hood podcast,
Speaker 1: and I'm Philip Blogger Cranstar, Senior editor for Crypto at
Speaker 1: Bloomberg News. In today for Stacy Marie Ishmael. It is Wednesday,
Speaker 1: March the first. The Bank of England and the UK
Speaker 1: Treasury are moving forward with a plan to launch a
Speaker 1: digital currency. It's being called a CBDC, which is short
Speaker 1: for Central Bank Digital Currency and afflete nicknamed Britcoin, but
Speaker 1: some critics are calling it a solution in search of
Speaker 1: a problem, particularly given the strength of the UK's fintech industry.
Speaker 1: Here today to join me to talk about this is
Speaker 1: Bloomberg reporter Emmelinicole. Emily, It's nice to finally be here
Speaker 1: with you in the studio today. How are you? I'm good, Thanks,
Speaker 1: How are you? Are you enjoying London? I am enjoying
Speaker 1: London very much and rainy for your face, it's very
Speaker 1: nice and rainy. I'm told that the weather was beautiful yesterday.
Speaker 1: Today with my arrival, it is clearly changed. Perfect for
Speaker 1: our little conversation we're about to have absolutely and we're
Speaker 1: gonna be talking about Britcoin today. So let's just delve
Speaker 1: straight into it. Chawe, can you briefly explain to us
Speaker 1: what a CBDC is. So, a central bank digital currency
Speaker 1: is a form of government issued money that instead of
Speaker 1: being on a ledger in the Bank of England and
Speaker 1: on commercial banks own leasures, it's also backed on blockchain,
Speaker 1: so it's verifiable there is a token that transfers between
Speaker 1: this and that. At the minute, it's all a little
Speaker 1: bit more up in the air than that. Like, you know,
Speaker 1: if you get money sent to you in your bank
Speaker 1: account as a retail user, it looks like you had
Speaker 1: some numbers in one bank that went to some numbers
Speaker 1: and other banks. That's actually not quite how it works
Speaker 1: under the hood. But with CBDCs is a bit more
Speaker 1: of a blockchain transfer involved. And at a very basic level,
Speaker 1: what would be I mean, how would we compare to
Speaker 1: something like a debit card for everyday use, Probably is
Speaker 1: no different, I mean most of us, at least in
Speaker 1: the UK anyway, it's very like digital payments forward, and
Speaker 1: so spending on your debit card or spending a CBDC
Speaker 1: is is supposed to look and feel pretty much identical.
Speaker 1: The way that it's different and the reason why it's
Speaker 1: being developed is because at the minute, there are obviously
Speaker 1: people in crypto that are thinking of ways that they
Speaker 1: can use currency more fluidly, and so a CBDC, it
Speaker 1: is hoped, is a way that they can almost compete
Speaker 1: with the likes of Tether or Circle all these other
Speaker 1: private staple coins while having it still be government overseen
Speaker 1: bank money. So basically we've established it lives on a blockchain,
Speaker 1: but it's not really crypto. I mean, it's it's very
Speaker 1: distinct from what we were consider a crypto token. Yeah,
Speaker 1: it's not decentralized really in any way. It's still very
Speaker 1: much overseen by government. It's not anonymous either, so everybody
Speaker 1: knows who you are and where you're sending and how
Speaker 1: much you're sending it to. The only difference is that
Speaker 1: it will be I guess a little bit faster. Potentially,
Speaker 1: it may be more factable in terms of where you
Speaker 1: can send it and who you can send it to,
Speaker 1: because if while it's a compatible once they're developed, then
Speaker 1: that'll be a little bit easier than at the minute,
Speaker 1: where for example, you have to get someone's bank account
Speaker 1: details and have it all verified and all that kind
Speaker 1: of stuff. So it may be a solution to some
Speaker 1: of those issues. But as I said before, we're in
Speaker 1: a digital economy in the UK already, so a CBDC
Speaker 1: is something that is probably a little bit more helpful
Speaker 1: for those in less developed economies where the banking system
Speaker 1: is a little bit less advanced. This is the main
Speaker 1: objection here. You look at the former Bank of indiand
Speaker 1: Governor Irvin King calling it a solution in search of
Speaker 1: a problem, but simply creating a central bank digital currency.
Speaker 1: On the face of it, it's not obvious that it
Speaker 1: brings about the sort of transformation people often assume it
Speaker 1: must lead to. What do they mean when they say that, like,
Speaker 1: and this is not just We should be clear that
Speaker 1: this is not just in Britain, that this debate is
Speaker 1: going on. I mean, it's happening everywhere. But what is
Speaker 1: the point of view? How do you describe the point
Speaker 1: of view that this is a solution in search of
Speaker 1: a problem. So in the UK we have something called
Speaker 1: Real Time Growth Settlements RTGs. It's a very big system
Speaker 1: that the Bank has been working on for many many
Speaker 1: years and is actually currently in the process of quite
Speaker 1: of an expensive upgrade to that. And that's what enables
Speaker 1: things to payments to transfer pretty much immediately, Like if
Speaker 1: I were to send you money via bank transfer right
Speaker 1: now from UK bank to UK bank. It's almost instant.
Speaker 1: In other countries, even in the US, where you'd say
Speaker 1: the economy is pretty advanced, the banking system doesn't quite
Speaker 1: match up and it can still take several days. But
Speaker 1: in the UK anyway, we pretty much have that. And
Speaker 1: that's why others think of this as a solution and
Speaker 1: such of a problem, because that issue of instant payment
Speaker 1: is already solved somewhat. The reason why a CBDC may
Speaker 1: be useful in the eyes of skeptics because they see
Speaker 1: the bankers trying to compete with the world of crypto
Speaker 1: not get left behind. If other countries are also developing CBDCs,
Speaker 1: you know, they wonder if there's a digital yeah, or
Speaker 1: if there's a digital euro, perhaps a digital pound is
Speaker 1: required in order for us to be able to achieve
Speaker 1: proper conversion between those different economies. And the other thing is,
Speaker 1: as you already said, we have the E dollar. Well
Speaker 1: very early stages have talked about that. It's actually much
Speaker 1: further back than our so we're a bit more advanced
Speaker 1: on the yes exactly, we have the E one would
Speaker 1: be one that's very far ahead the NIRA in Nigeria,
Speaker 1: and we're seeing central banks around the world starting to
Speaker 1: tinker with these kinds of experiments. What is it? Is
Speaker 1: there anything about britcoin that stands out here? Which class
Speaker 1: of CBDCs does it belong to? So what we've been
Speaker 1: talking about over the last few weeks is mainly the
Speaker 1: proposals for a retail CBDC, so that's one to be
Speaker 1: used by U and me. There is also another conversation
Speaker 1: going on for a wholesale CBDC that would be a
Speaker 1: digital currency that would enable banks to transfer between each other,
Speaker 1: so it would help settle larger amounts of capsule between
Speaker 1: you know, JP Morgan and Gobin Sacks or Santander an
Speaker 1: HSBC and make that side of the system a little
Speaker 1: bit faster. There's more of an argument for a wholesale CBDC.
Speaker 1: Even the Bank em England Governor Andrew Bailey has said,
Speaker 1: you know, a whole sale CBDC has quite a few
Speaker 1: many uses and might actually be something that could really
Speaker 1: help improve the banking system in this country. But for
Speaker 1: a resale one, there's there's a little bit more of
Speaker 1: a limited use case. You know, people could could expect
Speaker 1: to be paid in a UK CBDC, they could want
Speaker 1: to pay their mortgage in it. But it really, at
Speaker 1: least in terms of what's're already out there, it's pretty
Speaker 1: similar to what we're used to and in some ways
Speaker 1: that's kind of important, right It needs to be similar
Speaker 1: because if the learning curve is too steep, then people
Speaker 1: want to use it at all. And we'll be right
Speaker 1: back for more with Bloomberg Crypto reporter Emmaly Nicol. And
Speaker 1: then there's also the proposal from the Bank am Inland
Speaker 1: to basically have a limit of how much you can hold.
Speaker 1: I believe it was ten thousand to twenty thousand pounds
Speaker 1: most Yes, between those two, what is that intended to
Speaker 1: cannot solve for? Is this also into you know, I
Speaker 1: imagine it has to do with the fear of sucking
Speaker 1: money out of the deposit system. What's the background of that? Yeah,
Speaker 1: I think initially, while a CBDC is still in its infancy,
Speaker 1: you wouldn't want to be able to put everything into it.
Speaker 1: It still needs to be tested, it still needs to
Speaker 1: be trialed to make sure that it works out in
Speaker 1: the open, and so that initial limit is something that
Speaker 1: helps banks to kind of maintain a bit of an
Speaker 1: understanding of exactly how a CBDC works, see how people
Speaker 1: are using it for several years before they then let
Speaker 1: it run wild and loose. One of the big concerns
Speaker 1: with digital currencies is always the idea of people not
Speaker 1: being able to track what it's being used for, money laundering,
Speaker 1: a list of finance. A UK CBDC should be able
Speaker 1: to counteract all of those things because they're not going
Speaker 1: to let anybody be private while they're using it. So
Speaker 1: ideally it should be the same as if you put
Speaker 1: money in a bank account, you're still going to have
Speaker 1: to tell the bank who you are. But there is
Speaker 1: obviously the concern that if a CBDC becomes something that
Speaker 1: is interchangeable with other digital currencies around the world, is
Speaker 1: interchangeable perhaps even with stable coins one day, that could
Speaker 1: lead to a Daisy chain of finance where then eventually
Speaker 1: you're not able to tell who somebody is. And there
Speaker 1: is there a debate in the UK about privacy when
Speaker 1: it comes to the development of cb and that the
Speaker 1: potential launch or bridcoin for sure, that is actually one
Speaker 1: of the biggest roadblocks to it, so the UK is
Speaker 1: not one to ever give up their individual privacy if
Speaker 1: they if they're going to avoid it. We had a
Speaker 1: legislative attempt a few years ago to set up a
Speaker 1: national Register of Identity for us all to have ID cards,
Speaker 1: something that's pretty common in some other countries but it's
Speaker 1: not a thing here and there was a very large
Speaker 1: public outcright to that. It didn't make it through our
Speaker 1: houses of Parliament because an is basically people didn't want
Speaker 1: the government having a register of who everybody is and
Speaker 1: where they live, and so with a CBDC that was
Speaker 1: one of the biggest concerns, so that we were giving
Speaker 1: a state institution, the Bank of England, the right to
Speaker 1: a repository of information about who everybody is, where they live,
Speaker 1: how much money they have. And that's one of the
Speaker 1: reasons why the commercial banks will be involved in this
Speaker 1: process because it keeps the Bank of England out of that.
Speaker 1: It doesn't let them see you know who you are.
Speaker 1: Everything is partially anonymized in that sense. The banks will know,
Speaker 1: but the Bank of England won't. If you look at
Speaker 1: the various levels of pushback from ranging from you know,
Speaker 1: looking at privacy, which to some extent, as you say,
Speaker 1: is being addressed, but also this idea that it's a
Speaker 1: solution in such of a a problem. As we talked about,
Speaker 1: what's the main marketing pitch, what's the boees and the
Speaker 1: government's pitch behind doing this. What are they trying to
Speaker 1: sell it on right now? Is it convenience? Is it
Speaker 1: a mix of different things? There's an element of the
Speaker 1: convenient side, right. They think that if everybody is currently
Speaker 1: finding stable coins nice and convenient, then they should find
Speaker 1: a digital pattern convenient too. There's a little bit of
Speaker 1: a chicken before the egg though with this right, stable
Speaker 1: coins still aren't that big. They're definitely not being used
Speaker 1: for everyday payments at present. The idea is that if
Speaker 1: crypto continues to grow at the level it is, and
Speaker 1: that is a possible future, that we will use stable
Speaker 1: coins for payments one day. And this is the Bank
Speaker 1: of eng Them wanting to say we're not going to
Speaker 1: get left behind with that. Even this, We started talking
Speaker 1: about UKCBDC several years ago and we weren't expected to
Speaker 1: even see anything like a CBDC in our hands to
Speaker 1: be used for at least the second half of this decade.
Speaker 1: And it's interesting that you mentioned stable coins, because you'd
Speaker 1: be hard pressed to find a central banker these days
Speaker 1: who loves stable coins, wouldn't you. I mean, giving what's
Speaker 1: happened the last year or so, the regular reaction that
Speaker 1: we've seen in the US. What is the regulatory view
Speaker 1: on stable coins right how would you describe it right now? Negative?
Speaker 1: Right now? Several big regulators, global bodies to national bodies
Speaker 1: alike have all said that no current stable coin it
Speaker 1: meets any of the existing standards that are out there
Speaker 1: a form of digital money, they would not be able
Speaker 1: to meet the parameters of emoney regimes in the UK,
Speaker 1: which is the thing they will have to meet in
Speaker 1: a few years time when that becomes law. And that
Speaker 1: is a big problem for stable coin issuers because if
Speaker 1: the pitch is that they want to become basically a
Speaker 1: digital pound, but without the Bank of England, they're going
Speaker 1: to need to meet these rules. Governments are pretty quickly
Speaker 1: trying to put regimes in place to put parameters around
Speaker 1: how stable coins are you used, how even the wallets
Speaker 1: are able to be used. Those who would store them
Speaker 1: would need to be registered with regulators too, and so
Speaker 1: a CBDC is essentially trying to compete with those in
Speaker 1: a way that will be regulated, will be safe to
Speaker 1: some extent. Safe assending is and would basically get ahead
Speaker 1: of stable coins before they can get in there first.
Speaker 1: So work is proceeding, we're moving ahead, but what does
Speaker 1: the timetable look right now? Like it's several years at least.
Speaker 1: I don't know if we have a specific date really,
Speaker 1: but it's definitely not imminent. I mean we're still at
Speaker 1: the stages where we're having to engage with various parties
Speaker 1: to decide exactly how each thing would look. This is
Speaker 1: this consultation that's come out from the Bank of England
Speaker 1: in twenty twenty three is kind of the first real
Speaker 1: framework that we've had from them in terms of what
Speaker 1: exactly this might look like, things the specifics of stuff
Speaker 1: like you know, twenty thousand pound limits. But there are
Speaker 1: still engagement forums happening every so often with different parties
Speaker 1: from the banking sectors to finance sectors, technology sectors to
Speaker 1: inform the Bank of Bing's work on that we haven't
Speaker 1: yet decided. For example, if the Bank and will be
Speaker 1: building its own blockchain to make this all happen on
Speaker 1: if it will license that. There are banks out there
Speaker 1: that have already developed into bank assesslement blockchains like JP Morgan.
Speaker 1: So those are all options. So in some stable coins
Speaker 1: are probably somewhere in our future. We don't quite know when,
Speaker 1: and we don't quite know yet how they will look,
Speaker 1: taste and fail. Yeah, but the government's a certainly worried,
Speaker 1: and that's why we're building a chout. Thank you, Emony. Thanks.
Speaker 1: That was Bloomberg reporter Emily Hall. You can find more
Speaker 1: of her reporting on the Bloomberg terminal and on Bloomberg
Speaker 1: dot com. For more, be sure to check out our
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