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Bank Of England Accepts CBDC Wallet “Proof Of Concept” Applications

by Blockchain NewsDecember 12, 2022

The bank stipulates that the wallet must be capable of performing fundamental functions such as exchanging currency and requesting payments, and has fixed its price at close to $255,000. The Bank of England (BOE) is interested in receiving a “proof of concept” for a wallet that will have the capacity to store a Central Bank Digital Currency (CBDC). The Board of Exchange (BOE) published a call for proposals on the Digital Marketplace of the United Kingdom government on December 9. The Digital Marketplace is a website where government entities may seek employment for digital initiatives.

In addition, the wallet has to demonstrate that it can be loaded and unloaded using a CBDC, that it can request peer-to-peer payments using an account ID or QR code, and that it can be used to pay online with companies. All of these capabilities need to be present.

A mobile app for iOS and Android, a website for the wallet, an example merchant website, and the back-end infrastructure to service the wallet website and applications while also keeping user data and transaction history are key deliverables for the project. The project will also generate these deliverables.

The bank stated that there had been “no work done” on a CBDC sample wallet, and that it “will not construct a user wallet itself.”

For the proof-of-concept project, which is projected to last for a total of five months and have a cost of 244,500 dollars (or 200,000 British pounds), the BOE has decided to analyze five different vendors.

At the time this was written, there had been no applications submitted.

The BOE has announced in the past that it intends to work toward establishing a CBDC by at least 2030.

The BOE’s work as part of Project Rosalind, a collaborative experiment it is carrying out with the Bank of International Settlements (BIS) Innovation Hub, is supported by the sample wallet. Project Rosalind’s goal is to create prototypes of an application programming interface (API) for a CBDC.

The Rosalind application programming interface will also be tested for implementation alongside the proof-of-concept wallet.

The Chancellor of the Exchequer, Jeremy Hunt, presented a series of reforms to Britain’s financial services industry on the 9th of December. One of these measures includes conducting a consultation on ideas for the formation of a CBDC.

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UK Group to Run Pilot Retail CBDC, Providing Data to Bank of England

by Blockchain NewsAugust 18, 2022

A UK-based cross-industry group known as the Digital FMI Consortium – Digital Financial Market Infrastructure (DFMI) – was launched on Wednesday to validate CBDC use cases that are expected to deliver benefits for the UK market.

The group plans to conduct privately led pilot trials of new digital currency payment rails like retail central bank digital currency (CBDC).

The consortium constitutes a group of private firms, including IBM, Finastra, and many other fintech with Boston Consulting Group (BCG) as consulting partners and supported by the UK’s Payment Association.

The group will explore retail CBDC in the UK and conduct real-world pilots to address open design questions and mitigate risks. The pilots will generate working data and feedback that the UK central bank and policymakers can use to inform open design questions and enable relevant authorities to make policy decisions.

The group will issue a privately-led Digital Sterling (dSterling), a digital settlement asset similar to a CBDC, to drive the pilot. The pilot will begin in October and run for 12-24 months.

The consortium will focus on real-world testing to assess a future digital currency ecosystem, environment, and economy that includes the coexistence of current forms of money, regulated digital assets (including cryptocurrencies and stablecoins) and CBDC, starting in the UK.

The group plans to use the blueprint set out by the initiative to launch private-sector pilots in multiple jurisdictions worldwide.

Private Sector Entering the CBDC Game

CBDC experiments continue to flourish across the globe. In May, the Bank for International Settlements released a survey showing that 90% of central banks are researching CBDCs while many others are beginning pilots.

The Bahamas, Cambodia, and Nigeria have already launched their CBDCs.

Despite such developments, progress is slow in other markets, which has left many in the private sector impatient for tangible results.

In the UK, the Bank of England’s latest initiative is a consultation. In March, the UK central bank and HM Treasury (HMT) announced plans to launch a consultation to ascertain whether the public sector should advance to a development phase of a retail CBDC. If the answer is yes, then the earliest date for the launch of a UK CBDC would be in the second half of the decade. That is according to a joint statement by the central bank and HM Treasury.

So far, the private sector consortium in the UK has not been satisfied with sitting on the sidelines of digital currency innovation.

In February, the consortium launched a ground-breaking initiative called “Project New Era,” calling for greater collaboration between the central bank, regulators, commercial banks, and other financial institutions on a UK CBDC.

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Tagged : Boe / CBDC / RETAIL CBDC / UK GROUP

BoE’s Committee Recommends Taking a Closer Look on Crypto Regulation

by Blockchain NewsJuly 6, 2022

In its latest Financial Stability Report, the Financial Planning Committee (FPC), an offshoot of the Bank of England has recommended pushing for an ‘enhanced’ regulatory framework.

According to the FPC, the obvious vulnerabilities that are being exhibited by the nascent industry are not posing an immediate threat to the broader financial ecosystem.

Nonetheless, the report hightlighted the need to keep a close watch on cryptocurrencies as the perceived vulnerabilities are notably close to those experienced by mainstream traditional financial players.

As identified, the FPC said these vulnerabilities include “liquidity mismatches leading to run dynamics and fire sales, and leveraged positions being unwound and amplifying price falls. Investor confidence in the ability of certain so-called ‘stablecoins’ to maintain their pegs was weakened significantly, particularly those with no or riskier backing assets and lower transparency.”

“On liquidity mismatches, we can agree that the recommendations of the FPC are largely genuine as current events point out. We have seen the liquidation of one of the biggest and most established hedge funds in the cryptocurrency ecosystem, Three Arrows Capital as ordered by a Court of Law in the British Virgin Islands where the firm operates from.”

The amplifying price falls were reflected by the collapse of the Terra-LUNA coin which shed off more than 99.9% of its price within a week back in May. Alongside its sister stablecoin, UST which was depegged from its $1 peg, the FPC specifically singled out stablecoins as the report noted that “some stablecoins held to be used for payments may not offer similar protections to the central bank or commercial bank money.”

While the United Kingdom is doing all it can to align its approach toward regulating stablecoins, the European Union has drawn a framework for stablecoins in its Markets in Crypto Assets (MiCA) bill passed last week. Japan has also passed a law to regulate stablecoins, a move that shows global regulators are no longer sleeping on their oars with respect to these asset classes.

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Tagged : Bank Of England / Boe / Regulation / Stablecoins

Following Market Crash, BoE Governor Says Crypto Has No Intrinsic Value

by Blockchain NewsJune 14, 2022

While traditional financial institutions gradually embrace Bitcoin, a longtime crypto sceptic, Bank of England Governor Andrew Bailey, has once again reasserted his stance recently, stating that the asset class has “no intrinsic value.”

The governor of the British Central Bank testified in the U.K. Parliament on Monday, the day after lending platform Celsius paused transfers and withdrawals, a move that triggered a market crash on Bitcoin and other cryptocurrencies.

“Crypto-assets have no intrinsic value. This morning we have seen another blow-up in a crypto exchange,” Bailey stated.

Bailey’s comments came after major crypto lending platform Celsius Network decided to halt transfers and withdrawals on Monday, citing extreme market conditions. Celsius, which offers global services to customers worldwide, is headquartered in London, United Kingdom.

The UK-based cryptocurrency lending and borrowing firm stated that the action being taken currently aims to put Celsius in a “better position” to honour withdrawal obligations. However, market participants are concerned with Celsius’ ability to meet its long-term debts and financial obligations.

This is not the first time that Bailey made such sentiments. The U.K. Central Bank governor has never been a fan of cryptocurrency. Last month, the governor said that Bitcoin has no intrinsic value and cryptocurrencies are not suitable as a practical means of payment. His warning came after the crypto market plunged last month, a crash that shed almost $500 billion that month. The market, which fell on May 12, sent Bitcoin price below $26,000 for the first time in 16 months. That marked the first time the crypto sunk below $26,000 since December 26 2020.

The Celsius move further triggered a plunge across cryptocurrencies, with total crypto value falling below $1 trillion for the first time since January 2021 and Bitcoin tumbling below $23,000 per coin.

Central Banks Researching CBDCs

While Bailey admits that blockchain, the underlying technology of cryptocurrencies, is important, he is convinced that Bitcoin is unsuitable as a means of payment. Last month, the governor said that Britain’s Central Bank is researching a launch of its own digital currency.

Most central banks have remained sceptical about cryptos and are taking a cautious approach. They embark on launching their own cryptocurrency, backed by foreign guarantees, rather than trusting some private digital coins.

Many central banks around the globe have been researching the practicalities of creating their own digital currencies. So far, about 10 central banks, including the Bahamas, Nigeria, Cambodia, China, and island nations (Antigua and Barbuda, Grenada, Saint Kitts and Nevis, Saint Lucia, Dominica, and Montserrat) have created their own central bank digital currency. Other 100 nations are actively evaluating central bank digital currencies (CBDCs).

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Tagged : Andrew Bailey / Bitcoin / Boe / Cryptocurrencies / Industry Expert / UK

Bank of England Solicits Funds to Enhance Crypto Crackdown

by Blockchain NewsApril 22, 2022

Britain’s apex bank, the Bank of England, through the Prudential Regulation Authority (PRA), is looking to raise as much as 321 million pounds ($419 million) from the commercial institutions it is regulating as it is planning to shore up its regulatory efforts in the digital currency ecosystem.

With the proposed funds it hopes to raise projected to be 8% above what was pulled by the PRA in 2021, the Bank of England is looking to onboard as many as 100 staff that will help chart its regulatory agenda for the nascent industry moving forward.

The digital currency ecosystem is worth more than $2 trillion at its peak, a figure that is no longer negligible. Despite the fact that this figure is just a fraction of the $469 trillion global financial systems, officials of the Bank of England believe the industry is large enough to upset the financial industry, the way the Mortgage industry did when it ushered in the global financial crisis of 2008.

In addition to the plans of the PRA as detailed in its business plans, it plans to “ask firms to report their crypto-asset exposures, treatments, and future investment plans” to help establish a common international framework for digital currencies.

From its regulatory actions, the Bank of England has a very dominant stance concerning the regulation of cryptocurrencies. In September 2020, the Governor of the BoE, Andrew Bailey, recognised the importance of stablecoins in the monetary ecosystem, adding that Bitcoin has no connections to money.

In its own way of identifying more with the evolution of money, the Bank of England is developing its own Central Bank Digital Currency (CBDC) or Digital Pound. With the growing number of crypto users being recorded in the United Kingdom, stepping up its regulatory moves is a good way for the BoE to register its interest in a more coordinated effort with other regulators in the world as it concerns the developing crypto world.

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Tagged : Bank Of England / Boe / Crackdown / Regulation / Stablecoins

Bank of England Teams up with MIT on CBDC Research Project

by Blockchain NewsMarch 28, 2022

To delve deeper into the opportunities, risks, trade-offs, and potential technical challenges faced when developing a CBDC system, the Bank of England (BoE) has joined hands Massachusetts Institute of Technology (MIT) on a year-long research project.

In a statement, the Bank of England pointed out that the project aimed to explore the underlying technology and not create an operational central bank digital currency (CBDC). Per the announcement:

“The collaboration forms part of the Bank’s wider ‘research and exploration’ into CBDC, and will be focused on exploration and experimentation of potential technology approaches.”

The partnership will involve England’s apex bank with the MIT Media Lab’s Digital Currency Initiative (DCI).

The BoE follows in the footsteps of the Bank of Canada and the Federal Reserve Bank of Boston as research partners with the DCI.

However, a decision has not been made on whether to roll out a CBDC in the United Kingdom, given that it would be a significant national infrastructural project.

The financial regulator recently announced the first regulatory framework for crypto assets based on their rapid growth.

CBDCs have emerged as a hot topic in the modern era based on the technological innovations being witnessed in the financial system.

Hiromi Yamaoka, a former Bank of Japan executive, recently suggested that the sanctions slapped on Russia due to its invasion of Ukraine might prompt more nations to adopt CBDCs as a shield against the U.S. dollar’s supremacy in the global financial system.

Yamaoka added that national security and defence would become key issues when discussing CBDCs.

Earlier this month, the University of Cambridge, through the Cambridge Centre of Alternative Finance (CCAF), rolled out a multi-year research initiative with 16 key financial institutions like the WorldBank, IMF, and MasterCard to shed more light on the rapidly evolving crypto-asset ecosystem, with CBDCs being one of the areas of interest.

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Tagged : Boe / CBDC / Mit / UK

Bank of England Outlines Framework for Regulating Crypto Assets

by Blockchain NewsMarch 25, 2022

The Bank of England, the Central Bank of the United Kingdom, announced Thursday the first regulatory framework for crypto assets in the country. The UK Central Bank made a move as it admitted that though the crypto sector remained small, its rapid growth could pose risks to financial stability in future if it remains unregulated.

Of late, crypto coins have come under the regulatory spotlight amid concerns they can be used to circumvent financial sanctions imposed on Russia since its invasion of Ukraine.

In a statement on Thursday, the Central Bank’s Financial Policy Committee (FPC) stated: “While crypto assets are unlikely to provide a feasible way to circumvent sanctions at scale currently, the possibility of such behaviour underscores the importance of ensuring innovation in crypto assets is accompanied by effective public policy frameworks to… maintain broader trust and integrity in the financial system.”

The Financial Policy Committee said that although direct risks to financial stability from cryptocurrency are currently limited, if the recent growth continues, there would be risks in the future. The committee admitted that crypto-assets like Bitcoin and Ether are largely unregulated as they fall outside the setout regulatory scope. However, the committee now considers a change of law to be made to bring cryptocurrencies inside the full scope of UK securities rules.

According to the FPC, regulation for the crypto sector should be based on “equivalence”. This means that crypto-related financial services that function similarly to the existing traditional financial services should be subjected to the same laws.

The FPC further stated that setting up such a regulatory framework would help mitigate risk associated with stablecoins that do not have a deposit guarantee scheme or regime for winding themselves down if in trouble.

The FPC disclosed that the Central Bank and Financial Conduct Authority (FCA) will conduct further tasks on rules for stablecoins and consult on a regulatory “model” for systemic stablecoins in 2023.

While the UK Central Bank is working on bringing cryptocurrencies fully under the regulatory framework, the regulator has been focusing on ensuring that risks from crypto-assets are controlled in the banking sector.

On Thursday, Sam Woods, the Deputy Governor at the Bank of England, wrote to local lenders about banks and investment firms’ rising interest in offering crypto trading services.

Woods told lenders that the boards of banks should fully consider risks from crypto-assets and therefore adapt their existing risk management strategies and systems. “We would also expect firms to discuss the proposed prudential treatment of crypto-asset exposures with their supervisors,” Woods said in reference to the amount of capital required to cover any losses.

The Central Bank considering CBDC

This is not the first time the UK Central Bank has warned on cryptocurrency risks. Late last year, a senior Bank of England official warned that fast-growing crypto-currency assets could pose a danger to the established financial system. In December, Sir Jon Cunliffe, the Deputy Bank Governor, said that although not much of UK households’ wealth is currently held in assets like Bitcoin, they are becoming more mainstream. The executive emphasized that cryptocurrencies had been “growing very fast”, with people like fund managers wanting to know whether they should hold part of their portfolios in crypto assets.

When cryptocurrency becomes integrated into the financial system, a major worry is that big price correction could significantly affect other markets and affect established financial market participants. Mr. Cunliffe, therefore, urged authorities to beef up measures and get a regulatory framework in place to contain the crypto risks.

One of the counters that the Bank of England has taken is to embark on research and exploration for a potential launch of its own cryptocurrency (a central bank-backed digital currency) to tackle some of the challenges posed by cryptocurrencies such as Bitcoin.

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Tagged : Bank Of England / Boe / Crypto Assets / Framework / Regulation / UK

Bank of England Calls for Stricter Global Regulation of Crypto Assets

by Blockchain NewsMarch 25, 2022

According to Bloomberg, the Bank of England (BOE) intends to tighten regulation of cryptocurrencies for the global frameworks, preventing from harming its financial stability.

The current size of the crypto-asset market has grown by more than ten times from $0.13 trillion since January 2019. According to CoinGecko, the value of the cryptocurrency market was back at $2 trillion as of 10:15 a.m. ET on March 3. The total cryptocurrency market value is still below the $3 trillion since four months ago.

With many assets outside the scope of the Financial Conduct Authority (FCA), the Bank of England suggested expanding the role of the prudential and market integrity regulator to coordinate and cooperate with each other in regulating crypto assets, according to minutes of the BoE meeting released Thursday.

the BOE committee said that:

“Enhanced regulatory and law enforcement frameworks are needed, both domestically and at a global level,”

In addition to this, the BoE also stated that while the immediate risks to the UK financial system are limited, there may be financial stability risks if the pace of growth in crypto assets continues.

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Tagged : ASSEST / Bank Of England / Bitcoin / Blockchain / Boe / Crypto / Regulation

Bank Of England Will Scramble To Buy BTC Before It Hits $1 Million, Says Bitcoin Maximalist

by NEWSBTCOctober 17, 2021

Bitcoin expert Max Keiser has said that the Bank of England (BoE) will scramble to buy Bitcoin before the digital asset trades at $1 million.

His comments come after Bank of England’s deputy governor for financial stability, Jon Cunliffe, warned that cryptocurrencies could spark a global financial crisis unless tough regulations are introduced. Although regulators in many countries have started putting policies in place to manage the rapid growth of cryptocurrencies, Cunliffe said this must be pursued as a matter of urgency.

Bank of England Warns Against Crypto

The deputy Bank of England governor has called for strict regulations on Bitcoin and other cryptocurrencies. According to the Guardian, Cunliffe has played a central role in monitoring cryptocurrencies over recent years as an adviser to the G20’s financial stability board and the central banks’ overarching advisory body, the Geneva-based Bank of International Settlements.

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Related Reading | Bank Of England Seeks To Strengthen Cryptocurrency Regulations

In a speech on Wednesday, October 13, Cunliffe compared the growth rate of the crypto market, from $16 billion five years ago to $2.3 trillion today, to the $1.2 trillion subprime mortgage market before the 2008 financial crash. He said there was a probability that financial markets could be rocked in a few years by an event of similar magnitude.

“When something in the financial system is growing very fast and growing in largely unregulated space, financial stability authorities have to sit up and take notice,” he said.

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He also spoke about the majority of crypto-assets having no intrinsic value and could be worthless overnight. He stated emphatically how the crypto world is beginning to connect to the traditional financial system even though the space is still largely unregulated.

The banking chief added that there were “Financial stability risks currently are relatively limited, but they could grow very rapidly if, as I expect, this area continues to develop and expand at pace. How large those risks could grow will depend in no small part on the nature and on the speed of the response by regulatory and supervisory authorities.”

Related Reading | Bank of England Governor Still Isn’t a Fan of Bitcoin

His comments are similar to those of Bank of England Governor Andrew Bailey. In May, Bailey called crypto dangerous and warned that investors should be prepared to lose all their money due to the digital assets’ lack of intrinsic value.

Bitcoin Expert’s Response

Bitcoin expert Max Keiser responded to the Bank of England’s deputy governor’s recent warning about cryptocurrencies in a statement to Express.co.uk.

He said, “Bitcoin is designed to trigger a meltdown of the current fiat money banking system. This is a mathematically guaranteed outcome.”

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Keiser implies that the BoE is grieving because Bitcoin killed central banks. “Bitcoin killed central banks. The Bank of England is in the second stage of the five stages of grief, the anger phase.”

He further pronounces that the Bank of England will eventually consider adopting Bitcoin.

“The bargaining phase will be their central bank digital currency stage and when that fails comes depression as the price tops £363,000 ($500,000) and then acceptance with the Bank of England scrambling to buy Bitcoin before it tops £727,000 ($1million) per coin,” Keiser says.

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Tagged : #BTC / All News / Bank Of England / Bitcoin / Bitcoin Maximalism / Boe / Crypto / CRYPTO REGULATION / Cryptocurrencies

Crypto Can Stir Radical Improvements in Financial Services: BoE Deputy Gov

by Blockchain NewsOctober 15, 2021

The Deputy Governor of the Bank of England (BoE), Sir John Cunliffe, has pointed out that digital currencies are viable enough to push “radical improvements in financial services.”

Speaking to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the banking veteran said the potential of the nascent assets does not negate the fact they have inherent financial risk.

Sir Cunliffe noted that financial stability risks currently are relatively limited. Still, they could grow very rapidly if the digital currency industry continues to grow at the fast pace it is currently trailing. There are a lot of factors that can spike these financial stability risks, as observed by Sir Cunliffe, with the lack of intrinsic value and lack of regulations being amongst the most obvious.

“Cryptoassets are growing fast, and there is [a] rapid development of new applications for the technology,” he said.

“The bulk of these assets have no intrinsic value and are vulnerable to major price corrections. The crypto world is beginning to connect to the traditional financial system and we are seeing the emergence of leveraged players. And, crucially, this is happening in largely unregulated space.”

The growth of cryptocurrencies has charted the industry’s market capitalisation from $16 billion about five years ago to over $2.36 trillion today. There has been a broad influx of institutional investors into the nascent industry in the past year, a trend that confirms the maturity of the developing asset classes.

The inherent threats in these digital assets account for the notable regulatory crackdown that financial watchdogs worldwide are deploying to stump the industry’s growth. However, Sir Cunliffe says while watchdogs can regulate the space accordingly, they should approach the sector with caution to not stump out generational innovation.

“When something in the financial system is growing very fast and growing in largely unregulated space, financial stability authorities have to sit up and take notice. They have to think very carefully about what could happen and whether they or other regulatory authorities need to act,” he said, adding that “at the same time, they need to be careful not to over-react – particularly when faced with the unfamiliar. We should not classify new approaches as ‘dangerous’ simply because they are different. Innovation, technology and new players can tackle longstanding frictions and inefficiencies and reduce barriers to entry.”

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Tagged : Bank Of England / Boe / Cryptocurrency / Digital Currency / Regulation / UK