In pursuit of becoming a global crypto hub, the United Kingdom seeks to revamp the traditional financial market using distributed ledger technology (DLT), according to the finance ministry, as reported by Reuters.
By live testing crypto blockchain technology in activities like settlement and trading of bonds and stocks, the UK intends to make the financial market more efficient and innovative for users.
Per the report:
“In financial markets, the trading of stocks, bonds, and other assets traditionally involves three distinct activities of trading, clearing, and settlement. Using DLT could change this and allow financial assets such as bonds or stocks to be issued in hours rather than days or weeks.”
DLT projects will be tested using a financial market infrastructure dubbed “sandbox” from next year, according to the ministry’s director-general for financial services, Gwyneth Nurse. “A sandbox will allow testing new regulatory best practices and making permanent changes to ensure market users benefit,” Nurse added.
Nurse also pointed out that the Bank of England and the finance ministry were delving deeper into the digital pound as a public consultation was expected later this year.
The sandbox is expected to be rolled out simultaneously with the stablecoin regulation.
It seems a race against time for global governments to put up guardrails in the stablecoin arena following the shocking collapse of the algorithmic TerraUSD (UST) stablecoin, which triggered the loss of approximately $60 billion.
Meanwhile, In Asia, Japan recently passed a law stipulating that stablecoins would only be issued by licensed banks, trust companies, and registered money transfer agents to protect investors.
As talks about the release of a digital pound by 2025 are yet to happen, British members of parliament (MP) are already doubtful that their use could harm financial stability, raise the cost of credit and erode privacy.
In order to fight private sectors from gaining total domination over digital payments and the fall of cash use accelerated in some cases due to the COVID-19 pandemic, central banks around the world have begun to focus on CBDCs.
CBDCs are a virtual form of fiat currency. A CBDC is an electronic record or digital token of a country’s official currency, according to Investopedia. A meeting of Britain’s central bank and finance ministry to discuss whether to move forward on a possible central bank digital currency (CBDC) will be held this year.
However, according to the report by a committee in the UK’s House of Lords, daily use of an e-pound could see people transfer cash from commercial banks accounts to digital wallets which could potentially spark financial instability in times of economic stress and increase borrowing costs. Also, the use of a digital pound would allow the central banks to monitor spending which could harm privacy, the report added.
“We were really concerned by a number of the risks that are posed by the introduction of a CBDC,” Economic Affairs Committee Chair Michael Forsyth said.
Forsyth also added that regulation could be a better tool to fight the threat of crypto issued by Big Tech firms, instead of introducing a digital pound that carries numerous risks.
However, on a potentially positive note, the report stated that securities trading and settlement could become more efficient with a wholesale use of CDBC to transfer large sums.
Britain’s central bank and finance ministry should consult on its advantages over the expansion of the existing settlements system, it said. Although talks are yet to happen, ultimately Britain’s parliament has the final say on any decision to launch an e-pound.
Global scenario
Speaking of the development of CBDC, the Bahamas became the first country to launch CBDC since 2020, called Sand dollar.
In Africa, Tanzania is planning to follow in the footsteps of Nigeria who became the African country to release their own version of CBDC called eNaira in 2021.
While many central banks across the world are studying digital versions of their currencies, China has been at the forefront of CBDC moves.
According to a January 5, 2022, report by Blockchain.News, the People’s Bank of China (PBoC) extended its pilot tests for the country’s Central Bank Digital Currency (CBDC) or digital Yuan to launch a new mobile wallet.
China’s efforts with respect to developing a CBDC have been well commended in the past years. The PBoC launched trials for the Digital Yuan back in 2020 and has conducted a number of transactions to showcase the efficacy of the CBDC in retail transactions, the report added.
On January 7, 2022, China’s WeChat – the world’s largest chat app – became compatible with payments using the digital yuan ahead of the Beijing Winter Olympics, owner Tencent Holdings said, according to Blockchain.News.
In Central America, Mexico is planning on publicly distributing the Digital Peso by 2024.
Banco de México, the Central Bank of Mexico, has revealed that its projected Central Bank Digital Currency (CBDC), dubbed the Digital Peso, will be up for public distribution by 2024, Blockchain.News reported.
In Africa, the Bank of Tanzania is exploring ways to introduce a CBDC on its monetary system to enhance the domestic payment system, according to Bloomberg.
“To ensure that our country is not left behind by the adoption of central bank digital currencies, the Bank of Tanzania has already begun preparations to have its own CBDC,” Bank of Tanzania Governor Florens Luoga said.
Payments giant PayPal launched new services allowing customers in the U.K. to buy, hold and sell Bitcoin.
On Monday payments giant PayPal launched new services allowing customers in the U.K. to buy, hold, and sell Bitcoin and other cryptocurrencies. The service will be available to personal accounts, not business accounts, that have verified their identity with the platform.
Jose Fernandez da Ponte, Vice President and General Manager of Blockchain, Crypto and Digital Currencies at PayPal commented, “The pandemic has accelerated digital change and innovation across all aspects of our lives — including the digitisation of money and greater consumer adoption of digital financial services.”
This is the first expansion of PayPal’s bitcoin trading services outside of the U.S. The platform has simultaneously launched educational content about Bitcoin and other cryptocurrencies on the platform as well.
Jose continued, “Our global reach, digital payments expertise, and knowledge of consumer and businesses, combined with rigorous security and compliance controls provides us the unique opportunity, and the responsibility, to help people in the UK to explore cryptocurrency..”
The announcement comes after PayPal’s CEO Dan Schulman hinted during the company’s Q2 earnings call that Bitcoin buy and sell functionality was coming to Britain, a development that sees PayPal following through with promises it issued back in February. PayPal’s new crypto offerings were made possible through a partnership with Paxos Trust Company.
Customers can now buy, hold, and sell as little as £1 of Bitcoin on the platform via the website or the mobile app. The functionality of the app is still quite limited, as customers cannot send or receive Bitcoin. For Bitcoin users who see the app as a way to ease consumer onboarding, however, there is hope essential wallet features enabling withdrawals and deposits in Bitcoin might soon be forthcoming.
Without the ability to withdraw Bitcoin to another wallet, it is questionable whether PayPal has enabled access to Bitcoin at all. The feature is more akin to an I-owe-you for Bitcoin, a price exposure vehicle that popular exchanges such as Robinhood also offer.
Notably there are both transaction fees and currency exchange fees for buying and selling through the platform, a feature that other mobile payments service providers such as Square’s Cash App also have. Although Cash App has consistently made efforts to give Bitcoiners control of their withdrawal fees and enabled free off-chain transfers inhouse, they still collect large fees on purchases.
The leader in this space is Strike, which allows virtually feeless buying, selling, transferring and receiving of Bitcoin. Importantly, neither Cash App or Strike provide access to altcoins. PayPal’s provision of altcoin access shows it is choosing profit over understanding. It marks a nascent understanding of Bitcoin, but is an improvement nonetheless.
Barclays clients in the UK can no longer transfer funds to Binance after the bank indefinitely banned credit and debit card transactions to the exchange, according to recent reports. The apparent ban comes roughly two weeks after the UK’s Financial Conduct Authority (FCA) stated that Binance Markets Limited, the firm’s UK operations, was not holding proper authorization to carry out crypto operations in the country.
Binance & The FCA: Where It All Stands
The Barclays UK Help Twitter page is routinely replying to frustrated consumers with copy-and-paste language stating: “It’s our responsibility to help protect your money. With this in mind we’ve taken the decision to stop payments made by credit/debit card to Binance until further notice, to help keep your money safe.” The account also directs users to the FCA homepage for more information.
The exchange had been ordered by the FCA in recent weeks to stop crypto regulated activity in the country no later than June 30; while generic crypto-assets are unregulated, surrounding trading products such as futures and options are regulated in the UK.
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The FCA is a watchdog that is a financial regulatory body, but also independent from the UK government. As part of broader statement, the FCA also showed broad concern around crypto exchanges at large; the watchdog gave exchanges six weeks from the public letter issue date to remind customers how their money is protected and to send clear messaging that regulatory protection does not apply to them. Accordingly, a number of exchanges, such as Coinbase and Uphold, have issued releases to their UK clients.
Related Reading | Bitcoin Whales Accumulate 60,000 Bitcoins In A Day. What Happens Now?
What’s Next?
It’s difficult to pinpoint next steps for Binance both in the UK and globally. The UK joins a growing list of countries that have been probing or investigating Binance, including the US, Japan, Thailand, and Canada. The firm has also had it’s headquarters move around substantially, before finally concluding that it is a “decentralized” company with no corporate headquarters.
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The FCA has only approved five crypto companies to date, and while Binance had applied within the past year to join that list, the company reportedly pulled their own application after “intensive engagement” from the FCA. Binance has responded to the FCA expressing disappointment in the watchdog’s decision, stating the compliance and regulations continue to be a focal point for the firm, and noting that Binance and Binance Markets Limited are separate legal entities.
The global exchange could likely face increased pressure from traditional UK institutions, but it remains to be seen what the long-term, lasting impact that regulatory scrutiny – in the UK and beyond – will do to impact Binance’s broader operations.
Binance's native token BNB has stayed surprisingly resilient in recent months relative to the broader market, despite increased scrutiny from regulatory bodies. | Source: BNB-USD on TradingView.com
Related Reading | Brian Armstrong Says China’s Digital Currency Is A Threat To U.S.
Featured image from Pixabay, Charts from TradingView.com
A British government official stated that Britain’s primary focus would be to regulate stablecoins, rather than the extensive cryptocurrency market.
Stablecoins’ Perceived Threat Propels Calls for Regulation
According toReuterson Tuesday (Mar. 30, 2021), Britain’s Economic Secretary to the Treasury, John Glen, made the statement while speaking at a City and Financial conference. Glen’s call for stablecoin regulation stems from the fact that the minister believes stablecoins are a threat to competition.
The British minister also noted that stablecoins have grown to become the “largest component of cryptocurrencies by trading volume.”However, while no major company was yet to issue a stablecoin, the story could change overnight.
An excerpt from Glen’s statement reads:
“There is the potential for some firms to swiftly achieve dominance and crowd out other players, due to their ability to scale and plug into existing online services.”
Social media giant Facebook made headlines back in 2019 when it announced that it was planning to launch Libra. However, governments and regulators globally kicked against the project, stating that it could threaten the financial stability of sovereign countries.
After receiving lots of regulatory backlash, the team behind Librachangedthe project’s whitepater. In a bid to further appease regulators, the Libra name wasrebrandedto Diem in December 2020. Prior to the name change, a dollar-pegged stablecoin was supposed to launch in early Q1 2021.
Unlike other jurisdictions who are looking to introduce or already have laid down regulations for the crypto industry, Glen thinks otherwise. According to the British government official, there is no immediate need to regulate the general cryptocurrency sector.
Glen, however, seems to favor blockchain technology, stating that Britain would encourage the use of distributed ledger technology (DLT).
Meanwhile, the Financial Conduct Authority (FCA) said that it was not possible to use the current rules on electronic money to regulate stablecojns. According to the FCA’s head of consumer distribution policy, Alex Roy, “the e-money regime isn’t a perfect match for crypto.”
Governments Paying Attention to Stablecoins
Prior to Glen’s statement, the UK authorities have been making plans to i9ntroduce a regulatory framework for stablecoins. AsreportedbyBTCManagerback in November, the UK government opined that stablecoins made payments faster and cheaper.
Recently, the Bank of Thailand (BOT) said isconsultingwith market regulators and participants before issuing regulations for stablecoins in 2021.
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