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.
Billionaire Sir Jim Ratcliffe has told Sky News that Britain is ready for a change of government after scolding the Conservatives over their handling of the economy and immigration after Brexit.
While insisting his petrochemicals conglomerate INEOS is apolitical, Sir Jim backed Brexit and spent last weekend with Labour leader Sir Keir Starmer at Manchester United – the football club he now runs as minority owner.
“I’m sure Keir will do a very good job at running the country – I have no questions about that,” Sir Jim said in an exclusive interview.
“There’s no question that the Conservatives have had a good run,” he added. “I think most of the country probably feels it’s time for a change. And I sort of get that, really.”
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Sir Jim was a prominent backer of leaving the European Union in the 2016 referendum but now has issues with how Brexit was delivered by Tory prime ministers.
“Brexit sort of unfortunately didn’t turn out as people anticipated because… Brexit was largely about immigration,” Sir Jim said.
“That was the biggest component of that vote. People were getting fed up with the influx of the city of Southampton coming in every year. I think last year it was two times Southampton.
“I mean, no small island like the UK could cope with vast numbers of people coming into the UK.
“I mean, it just overburdens the National Health Service, the traffic service, the police, everybody.
“The country was designed for 55 or 60 million people and we’ve got 70 million people and all the services break down as a consequence.
“That’s what Brexit was all about and nobody’s implemented that. They just keep talking about it. But nothing’s been done, which is why I think we’ll finish up with the change of government.”
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UK needs to get ‘sharper on the business front’
Prime Minister Rishi Sunak has indicated an election is due this year but Monaco-based Sir Jim is unimpressed by the Conservatives’ handling of the economy.
“The UK does need to get a bit sharper on the business front,” he said. “I think the biggest objective for the government is to create growth in the economy.
“There’s two parts of the economy, there’s the services side of the economy and there’s the manufacturing side. And the manufacturing, unfortunately, has been sliding away now for the last 25 years.
“We were very similar in scale to Germany probably 25 years ago.
“But today we’re just a fraction of where Germany is and I think that isn’t healthy for the British economy… particularly when you think the north of England is very manufacturing based, and that talks to things like energy competitiveness, it talks to things like, why do you put an immensely high tax on the North Sea?
“That just disincentivises people from finding hydrocarbons in the North Sea, in energy.
“And what we need is competitive energy. So I mean, in America, in the energy world, in the oil and gas world, they just apply a corporation tax to the oil and gas companies, which is about 30%. And in the UK we’ve got this tax of 75% because we want to kill off the oil and gas companies.
“But if we don’t have competitive energy, we’re not going to have a healthy manufacturing industry. And that just makes no sense to me at all. No.”
‘We’re apolitical’
Asked about INEOS donating to Labour, Sir Jim replied: “We’re apolitical, INEOS.
“We just want a successful manufacturing sector in the UK and we’ve talked to the government about that. It’s pretty clear about our views.”
Sir Jim was keener to talk about the economy and politics than his role at struggling Manchester United, which he bought a 27.7% stake in from the American Glazer family in February – giving him an even higher business profile.
Old Trafford stadium in Manchester. Pic: AP
Push for stadium of the North
He is continuing to push for public funds to regenerate Old Trafford and the surrounding areas despite no apparent political support being forthcoming. Sir Keir was hosted at the stadium for a Premier League match last weekend just as heavy rain exposed the fragility of the ageing venue.
“There’s a very good case, in my view, for having a stadium of the North, which would serve the northern part of the country in that arena of football,” Sir Jim said. “If you look at the number of Champions League the North West has won, it’s 10. London has won two.
“And yet everybody from the North has to get down to London to watch a big football match. And there should be one [a large stadium] in the North, in my view.
“But it’s also important for the southern side of Manchester, you know, to regenerate.
“It’s the sort of second capital of the country where the Industrial Revolution began.
“But if you have a regeneration project, you need a nucleus or a regeneration project and having that world-class stadium there, I think would provide the impetus to regenerate that region.”
Marks & Spencer’s website and app has not been working for several hours, with a message telling shoppers “you can’t shop with us right now”.
“We’re working hard to be back online as soon as possible,” it adds.
All the menus and images have disappeared apart from one showing a model in a green jacket.
Customers trying to use the app got the message: “Sorry you can’t shop through the app right now. We’re busy making some planned changes, but will be back soon.”
The site is understood to have been down for several hours.
Replying to one customer on X, the retailer said: “We’re experiencing some technical issues but we are working on it.”
M&S is the latest high street name to have technical issues – last month some Sainsbury’s shoppers had problems with their online orders.
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The outage comes a few days before M&S is expected to reveal a big jump in annual profits.
It’s been a successful year for the brand, with strong sales across the business following a turnaround plan that has included store closures and cost cutting.
Bosses at Revolut, Britain’s biggest fintech, are drawing up plans to allow employees to cash in with a sale of stock valued at hundreds of millions of pounds.
Sky News has learnt that the banking and payments services provider is lining up investment bankers to coordinate a secondary share sale worth in the region of $500m (£394m).
Morgan Stanley, the Wall Street bank, is expected to be engaged to work on the proposed stock offering, which will take place later this year.
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City sources said this weekend that Nik Storonsky, Revolut’s co-founder and chief executive, was determined to seek a valuation of at least the $33bn (£26bn) it secured in a primary funding round in 2021.
“This will not be a down-round,” said one person familiar with Revolut’s thinking.
Although the fintech, which has more than 40 million customers, is not planning to raise new capital as part of the transaction, any sizeable share sale will still be closely watched across the global fintech sector.
It is expected to be restricted to company employees.
Revolut ranks among the world’s largest financial technology businesses, with revenue virtually doubling last year to around £1.7bn, according to figures expected to be published in the coming months.
Founded in 2015, it has experienced a string of regulatory and compliance challenges, with reports last year highlighting its release of funds from accounts flagged by the National Crime Agency as suspicious.
The company’s growth has taken place at breakneck speed, with customer numbers soaring from 16.4m at the point of the Series E fundraising nearly three years ago.
The company’s growth has taken place at breakneck speed. Pic: Revolut
Insiders argued that despite the protracted downturn in tech valuations over the last two years, Revolut’s relentless expansion would easily justify it maintaining its status as Britain’s most valuable fintech.
Monzo, the UK-based digital bank, recently confirmed a Sky News story that it had closed a funding round worth nearly £500m, including backing from an arm of Google’s owner, Alphabet, and a Singaporean sovereign wealth fund.
Elsewhere, however, the funding landscape has been bleaker, with a growing number of tech companies which had attracted unicorn valuations of more than $1bn now struggling to stay afloat.
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Revolut has allotted stock options to many of its 10,000 employees as part of their compensation packages, although it was unclear how many would be eligible to dispose of equity in the transaction later this year.
A source close to the company said it had had numerous expressions of interest from prospective investors.
Revolut’s current shareholders include SoftBank’s Vision Fund and Tiger Global.
News of the proposed share sale comes as Revolut’s investors continue to await positive news about its application for a UK banking licence.
Revolut applied for a UK banking licence more than three years ago. Pic: Reuters
The company applied to regulators to become a bank in Britain more than three years ago, but has so far failed to secure approval.
Mr Storonsky has been publicly critical of the delay, and last year questioned the approach of British regulators and politicians, as he suggested that he would not contemplate a listing on the London Stock Exchange.
An initial public offering of Revolut appears to still be some way off, although it would not surprise investors or industry peers if it initiated a listing process in the next couple of years.
One person close to Revolut said board members were among those expected to participate in the secondary share sale, although further details were unclear this weekend.
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The company is chaired by Martin Gilbert, the City veteran who has faced governance and performance challenges at Assetco, the London-listed asset manager he runs.
Its other directors include Michael Sherwood, the former Goldman Sachs executive who was jointly responsible for its operations outside the US and who was regarded as one of the most skilled traders of his generation.
An external shareholder in the company said the exclusion of non-employees from the deal could draw criticism from some investors.
Revolut has conducted secondary share sales of this kind in the past, including after its 2021 Series E round.
This weekend, Revolut declined to comment.
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