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Brexit news: Economist warns UK MUST beat EU to the punch by launching

Brexit news: Economist warns UK MUST beat EU to the punch by launching

Digital euro project goals discussed by Valdis Dombrovskis

Daniel Hodson, Chairman of the CityUnited Project, warned failure to do so risks handing the initiative to Brussels – and with it the opportunity to damage the City’s “European leadership” in a move he fears would represent an “existential crisis” for the Square Mile – and a threat to the £40billion in tax revenue it contributes annually. Central bank digital currencies (CBDCs), also known as digital fiat currencies or digital base money, were inspired by Bitcoin – but are not themselves defined as cryptocurrencies.

China’s digital renminbi is the first CDBC to be issued by a major economy, and began undergoing public testing in April.

That same month, Mr Sunak confirmed the launch of a taskforce to coordinate “exploratory work” on Britain doing likewise, telling a financial industry conference: “The consultation process aims to deliver a rulebook that is fair, outcomes-based and supports competitiveness, whilst ensuring the UK maintains the highest regulatory standards.”

He later tweeted the single word “Britcoin” in reply to the Treasury’s announcement about the new taskforce initiative.

However, five months later, there are still no details about when a UK-based CBDC might become a reality – and Mr Hodson said there was no time to waste.

He told Express.co.uk: “Getting an early Sterling Central Bank Digital Currency launched, initially for City transactions, could provide a massive first Western mover advantage for Britain.

“China is about to do it, it’s on its way in the EU and US, and we’ve got the know-how, the resources, the people and the leadership skills but we don’t have the will at the moment.”

RIshi Sunak’s UK must beat Ursula von der Leyen’s EU to the punch, said Mr Hodson (Image: GETTY)

Rishi Sunak

Rishi Sunak, speaking earlier this year (Image: GETTY)

Mr Hodson said: “Forget about a retail – digital pound in your pocket – version; that can and should come later.

“The earliest possible wholesale (ie City) based Sterling CBDC could provide enhanced UK geopolitical soft power, greatly enhance our national security and provide immediate protection for City markets.”

Both the EU and US have already created formal initiatives which will “inevitably” lead to digital dollars and euros, Mr Hodson said.

Daniel Hodson, Chairman of the CityUnited Project, warned failure to do so risks handing the initiative to Brussels – and with it the opportunity to damage the City’s “European leadership” in a move he fears would represent an “existential crisis” for the Square Mile – and a threat to the £40billion in tax revenue it contributes annually.

Central bank digital currencies (CBDCs), also known as digital fiat currencies or digital base money, were inspired by Bitcoin – but are not themselves defined as cryptocurrencies.

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Daniel Hodson

Daniel Hodson is the chairman of the CityUnited Project (Image: Bruges Group)

China’s digital renminbi is the first CDBC to be issued by a major economy, and began undergoing public testing in April.

That same month, Mr Sunak confirmed the launch of a taskforce to coordinate “exploratory work” on Britain doing likewise, telling a financial industry conference: “The consultation process aims to deliver a rulebook that is fair, outcomes-based and supports competitiveness, whilst ensuring the UK maintains the highest regulatory standards.”

He later tweeted the single word “Britcoin” in reply to the Treasury’s announcement about the new taskforce initiative.

However, five months later, there are still no details about when a UK-based CBDC might become a reality – and Mr Hodson said there was no time to waste.

He told Express.co.uk: “Getting an early Sterling Central Bank Digital Currency launched, initially for City transactions, could provide a massive first Western mover advantage for Britain.

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Xi Jinping

Xi Jinping’s China is in the process of launching a digital currency (Image: GETTY)

Bitcoin

Bitcoin is probably the best known cryptocurrency (Image: GETTY)

“China is about to do it, it’s on its way in the EU and US, and we’ve got the know-how, the resources, the people and the leadership skills but we don’t have the will at the moment.”

Mr Hodson said: “Forget about a retail – digital pound in your pocket – version; that can and should come later.

“The earliest possible wholesale (ie City) based Sterling CBDC could provide enhanced UK geopolitical soft power, greatly enhance our national security and provide immediate protection for City markets.”

Both the EU and US have already created formal initiatives which will “inevitably” lead to digital dollars and euros, Mr Hodson said.

There are two basic models of CBDC: a wholesale one including interbank, financial market and large commercial transactions; and a retail one in effect creating a digital bank note, but recording the timing parties to and amount of any given transaction.

Cryptocurrencies

Status of central bank digital currencies in Europe (Image: Express)

Currently, 98 percent of the £750billion per day transactions across the Bank of England’s Real Time Gross Settlement System (RTGS) are wholesale, dwarfing retail transactions.

The current Bank of England RTGS system is 25 years old and in need of replacement – the current target date for completion has just been put back to 2025.

A RTGS successor system will need to complement and overlap with any Sterling CBDC initiative.

The EU is focusing on the wholesale model, not least as an opportunity to attack the City’s European pre-eminence, Mr Hodson said.

The risks of the UK not doing likewise were therefore both real and pressing, he emphasised.

City of London

The City of London is one of the world’s leading financial centres (Image: GETTY)

Mr Hodson explained: “A wholesale-led Euro CBDC would a massive advantage to continental financial centres, not least Paris, based on the very significant cost, speed and capital saving available to market participants, and would, in the absence of a Sterling alternative, result in rapid hollowing out of clearing and settlement business to those centres – and a swift unravelling of London’s dominance.

“The EU can see the opportunity a CBDC provides to undermine and unravel the City’s European leadership, and won’t hesitate to use it.

“It’s an existential risk and it could happen overnight.

“Financial markets are neither sentimental nor patriotic.”

He stressed: “The potential unravelling of the leading (currently perceived unassailable) advantages of the City as the leading European global financial centre creates an as yet under-recognised risk of the highest magnitude, not least in respect of the City’s net £40billion annual contribution to the Exchequer.”

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