Bank of England seeks views on ‘Britcoin’ impact
There was much excitement when, in April, the chancellor, Rishi Sunak, announced the launch of a new taskforce between the Treasury and the Bank of England to co-ordinate exploratory work on a potential central bank digital currency.
The currency was immediately nicknamed ‘Britcoin‘ although it is unlikely to take that name if or when it is eventually launched.
As part of the work, the Bank was asked to consult widely on the benefits, risks and practicalities of doing so.
That work is ongoing but, in the meantime, the Bank has published a discussion paper aiming to broaden the debate around new forms of digital money.
The issue is of huge importance to the Bank because its two main functions, as an institution, are to maintain both the monetary and financial stability in the UK. The rise of digital money has implications for both.
The Bank has already made clear that it is sceptical about cryptocurrencies, such as Bitcoin, which its governor, Andrew Bailey, has said “has no intrinsic value”.
Yet these currencies must be differentiated from a central bank digital currency.
The concept of a central bank digital currency may be confusing to some but Sir Jon Cunliffe, the Bank’s deputy governor for financial stability, said it was actually quite straightforward.
The Bank of England is responsible for UK monetary policy and financial stability
He told Sky News: “At the Bank of England, we issue banknotes, the notes that everybody holds in their pocket, but we don’t issue any money in digital form.
“So when you pay with a card or with your phone on a digital transaction, you’re actually using your bank account, you’re transferring money from your bank account to somebody else’s.
“A central bank digital currency, a digital pound, would actually be a claim on the Bank of England, issued by us, directly to the public.
“At the moment we only issue digital money to banks, we don’t issue to the general public, so it will be a digital pound – and it will be similar to some of the proposals being developed in the private sector.”
Sir Jon, who is co-chairing the taskforce with the Treasury’s Katharine Braddick, said that, while a central bank digital currency and a cryptocurrency like Bitcoin might use the same technology, there were big differences.
He went on: “[Central bank digital currencies] use the same technology but…they aim to have a stable value. They’re called stable coins and some of the technology companies, the big tech platforms, are just thinking about developing digital coins of that sort.
The European Central Bank is exploring a similar digital currency for the euro area
“A central bank digital currency would be a digital coin, actually a digital note, issued by the Bank of England.”
Sir Jon said such currencies would have to the potential to bring down costs for businesses depending on how they were developed.
He added: “They do offer the potential to bring down cost. At the moment the average cost, I think, for a credit card transaction is about just over half a per cent, but of course if you’re a small tea room in Shoreham-on-Sea, you’re going to be paying more than that in some cases, well over 1% for that transaction.
“So it could be cheaper, it could be more convenient. These new forms of money offer the ability for them to be integrated more with other things through their software. So you can think of smart contracts, in which the money would be programmed to be released only when something happened. You could think, for example, of giving the children pocket money but programming the money so that it couldn’t be used for sweets.
“There’s a whole range of things that money could do – programmable money, as it’s called – which we can’t do with the current technology.
“Now whether there’s a market, whether there’s a demand for that, whether that’s something people want in their lives, I think is another question – but we need to stay at the forefront of thinking.
“We need to stay ahead of these issues because we’ve seen changes can happen really fast in the digital world – people didn’t think smartphones had much or a market when the iPhone was first introduced – and it’s important we keep abreast of those issues.”
He noted that, under one ‘illustrative scenario’ set out in the Bank’s discussion paper, the cost of credit could rise in the event of people withdrawing deposits from the banking sector and migrated to a form of digital money.
This is why the Bank is seeking, in this discussion paper, to establish the conditions under which people might prefer using new forms of digital money to existing forms, such as cash or ‘private money’ like bank deposits. But that is easier said than done.
Sir Jon added: “It’s very difficult to know what the demand for something like this will be. It could be quite small – people might just want to keep a small wallet of digital coins for use on the internet, or whatever, but it could be quite large.
“That’s one of the things we want to try and understand better and [that’s why] we want to get views on how it would operate.
The value of cryptocurrencies such as Bitcoin have fluctuated wildly since their conception
“It’s important to say, given that it’s so difficult to estimate whether something like this would take off, that, if it were introduced, I think one would have to be quite careful at the beginning – you wouldn’t want to be in a position where something became very popular and had impacts that you hadn’t foreseen.”
To that end, the Bank’s discussion paper also considers the potential risks posed to economic stability by new forms of digital money.
The deputy governor went on: “It’s really fundamental that people can trust the money they use every day in the economy, that they don’t have to think about ‘I’m holding one form of money rather than another form of money, is this one more safe than another?’
“So the regulation is going to have to make sure – and the Financial Policy Committee of the Bank of England made this really clear – that if you issue these new forms of money, the users have to have the same level of confidence and security that they have in the money that circulates in this country at the moment, either Bank of England cash or commercial bank money in the form of bank accounts.
“It’s really crucial that people trust the money they use – we’ve seen from history that when confidence in money breaks down, for whatever reason, the social cost is enormous.”
All of which explains that, while most analysts assume the Bank will ultimately launch its own digital currency, it is taking its time to assess what the impact may be.
It is also clearly giving much thought to how it explains to households and businesses why such a move may be necessary.
The remaining bidders for The Daily Telegraph have been given a deadline for revised bids for the right-leaning newspaper as its stablemate, The Spectator magazine, clinches a £100m sale to the hedge fund tycoon Sir Paul Marshall.
Sky News understands that RedBird IMI, the Abu Dhabi-backed entity which was thwarted in its efforts to buy the media titles by a change in ownership law, has asked at least three parties to table second-round offers on 27 September.
It comes after bidders began holding talks with Telegraph bosses last week about the company’s business plan.
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The remaining parties are understood to include Sir Paul and National World, the London-listed media group run by newspaper veteran David Montgomery.
At least one other party whose identity has yet to be disclosed publicly is also in contention to buy the newspapers.
A separate bid orchestrated by Nadhim Zahawi, the former chancellor, is the subject of bilateral discussions with IMI, the Abu Dhabi-based venture which wanted to take a controlling stake in the British media assets before being blocked by the government.
Sky News revealed exclusively last month that Sir Paul was the frontrunner to buy The Spectator, which along with the Telegraph titles was owned by the Barclay family until their respective holding companies were forced into liquidation last year.
His deal for The Spectator, which will be implemented through Old Queen Street Ventures, will be announced this week, and potentially as early as Monday.
It will also include the art magazine Apollo.
The sale of The Spectator to Sir Paul Marshall will be announced this week
RedBird IMI, a joint venture between IMI and the American investor RedBird, paid £600m last year to acquire a call option that was intended to convert into equity ownership.
A sale of The Spectator for £100m would leave it needing to sell the Telegraph titles for £500m to recoup that outlay in full – or more than that once RedBird IMI’s fees and costs associated with the process are taken into account.
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One source said the price RedBird IMI had secured for The Spectator had exceeded expectations and left it well-placed to break even on its investment.
“The original decision to pre-empt an auction has been vindicated by the level of interest since it started,” the source said.
Of the unsuccessful bidders for the Telegraph, Lord Saatchi, the former advertising mogul, offered £350m, while Mediahuis, the Belgian publisher, also failed to make it through to the next round of the auction.
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Lord Rothermere, the Daily Mail proprietor, pulled out of the bidding earlier in the summer amid concerns that he would be blocked on competition grounds.
Sky News recently revealed that Mr Zahawi had sounded out Boris Johnson, the former prime minister, about an executive role with The Daily Telegraph if he succeeded in buying the newspapers.
IMI is controlled by the UAE’s deputy prime minister and ultimate owner of Manchester City Football Club, Sheikh Mansour bin Zayed Al Nahyan.
The Lloyds debt, which totalled more than £1.15bn, was repaid by RedBird IMI on behalf of the family.
RedBird IMI’s attempt to take ownership of the Telegraph titles and The Spectator was thwarted by the last Conservative government’s decision to change media law to prevent foreign states exerting influence over national newspapers.
Spokespeople for RedBird IMI and Sir Paul declined to comment.
A clearing bank launched just three years ago is raising tens of millions of pounds of fresh funding just days after it was served with a winding-up petition by the UK tax authorities.
Sky News understands that The Bank of London, which attempted to rescue Silicon Valley Bank UK last year, is progressing plans for the capital-raising, which one person close to the company said could secure “up to £50m”.
The precise figure was unclear this weekend.
The new funding is understood to be being lined up from a number of investors including an entity called Aphorism Holding, according to the person.
Nada Hadadi, a wealthy investor who was suggested as being the primary source of the capital, has in fact only contributed a six-figure sum.
News of the company’s capital-raising plan comes days after it announced that Anthony Watson, its founder and chief executive, was stepping down to become a senior adviser and non-executive director of its holding company.
HM Revenue & Customs had issued a winding-up petition against The Bank of London’s holding company over unpaid taxes.
The liability has now been settled, according to an insider.
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It described the issue as a “simple administrative handling delay caused by an internal miscommunication, which has been addressed”.
“We spoke with HMRC on Friday morning, and they are currently updating the filing.
“While this update may take a couple of days to reflect online, it is in process.”
The Bank of London claims to have amassed 4,500 clients since its launch but was outgunned last year by HSBC in a weekend race to rescue SVB UK.
More than 100 Body Shop stores have been saved from closure after a deal was struck to rescue one of Britain’s best known high street chains.
The well-known retailer was bought out of administration by a consortium led by “Cosmetics King” Mike Jatania.
The millionaire tycoon’s investment firm Aurea announced the completion of the acquisition on Saturday.
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Mr Jatania and Charles Denton, former chief executive of beauty brand Molton Brown, will head the new leadership team.
In a statement, Aurea said the deal would “steer the Body Shop’s revival and reclaim its global leadership in the ethical beauty sector it pioneered”.
It is understood there are no immediate plans to shut any of its 116 remaining UK stores.
Sky News revealed earlier this week that Aurea was poised to finalise the buyout as it lined up more than £30m in new financing.
Mr Jatania previously ran Lornamead – the owner of personal care brands including Lypsyl, Woods of Windsor, Yardley, and Harmony haircare – which he sold to rival Li & Fung for around £155m more than 10 years ago.
The Body Shop fell into administration in early February after previous forecasts for how much funding it would need to keep going proved too low.
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In the weeks that followed, administrators warned hundreds of jobs would be lost and dozens of shops closed.
The business had employed about 1,500 store workers before its collapse into insolvency.
The company’s administration underlined the decline of the high street stalwart.
It was founded in 1976 by Dame Anita Roddick, trading out of a small shop in Brighton, which made its name selling cruelty-free fair trade products.
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Mr Jatania, co-founder of Aurea, said: “With the Body Shop, we have acquired a truly iconic brand with highly engaged consumers in over 70 markets around the world.
“We plan to focus relentlessly on exceeding their expectations by investing in product innovation and seamless experiences across all of the channels where customers shop while paying homage to the brand’s ethical and activist positioning.”
Charles Denton, chief executive of the Body Shop, said: “We believe there’s a sustainable future ahead and working closely with the management team we aim to restore the Body Shop’s unique, values-driven, independent spirit.”
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