Treasury News Network

Learn & Share the latest News & Analysis in Corporate Treasury

  1. Home
  2. News
  3. Treasury insights

The Bank of England lacks the technical expertise necessary to issue CBDC at this time – Industry roundup: 01 March

Visa and Mastercard halt their cryptocurrency initiatives temporarily amidst sector volatility

Visa and Mastercard have reportedly briefly suspended their efforts in developing new partnerships with cryptocurrency companies due to a series of high-profile collapses in the industry, such as the bankruptcies in FTX and Blockfi. Additionally, the two payment giants have chosen to delay the introduction of new cryptocurrency-related products and services until the market and the regulatory environment improves, said reports.

The world's first crypto-backed payment card was introduced by Mastercard in April 2022 in collaboration with Nexo, a cryptocurrency firm. In November 2022, less than a month after announcing an extended collaboration with the exchange, Visa terminated its global credit card agreements with FTX.

Mastercard stated that its efforts are reportedly still concentrated on the underlying blockchain technology and how it may be used to address current problems and create more effective processes. Tom Hayes, Chairman and Managing Member at investment firm Great Hill Capital, commented that the firms should not proceed unless there is a clear regulatory framework. The delays in moving forward with crypto are reportedly not related to their primary business, but are due to the vague regulatory landscape and the reduction in demand for cryptocurrency services.

Visa's Head of Crypto, Cuy Sheffield, emphasized that the company intends to still seek to partner with additional crypto businesses, as digital assets backed by fiat could play a significant role in the payments ecosystem. However, he recognizes that there is some uncertainty in the market. Additionally, a Visa representative stated that they intend to continue to concentrate on strengthening its foundational Web3 infrastructure layers and analyzing the blockchain protocols guiding the crypto industry.

The Bank of England lacks the technical expertise necessary to issue CBDC at this time

The UK is not yet prepared to create a central bank digital currency (CBDC), according to Jon Cunliffe, Deputy Governor, due to the Bank of England’s (BoE) lack of expertise. The deputy governor stated during the treasury select committee hearing on 28 February that “there is more than a 50% chance that the central bank of the United Kingdom would issue a CBDC, but the regulator doesn’t have the technical skills to issue a digital currency yet.”

The BoE anticipates acquiring the requisite skills to proceed with the CBDC development into the following stage. Additionally, the central bank plans to test a future digital pound with partners from the private sector, which would include creating a functional prototype, testing in a simulated environment as well as in a real environment, and finally applying the results. Cunliffe noted that the main goal is to provide digital cash, or the digital equivalent of BoE notes, for general payment reasons, and they are not planning to build something that would resemble savings products.

Furthermore, the deputy governor noted a few possible CBDC benefits and features that are currently not available in the financial system. Cunliffe added that micropayments could be a key potential application for a digital pound. For instance, a newspaper subscription would not be required if an individual simply wanted to read an item and pay just a fraction.

The announcement reportedly coincides with the UK government becoming more engaged in CBDC development, with the Treasury launching a position in January 2023 to oversee the creation of a digital pound. Meanwhile, the European finance ministers recently reaffirmed support for a retail version of the digital euro, said reports.

France enacts stiffer crypto regulations for new participants

French legislators have authorised a set of tighter requirements for new cryptocurrency companies desiring to enter the crypto industry in France, subject to President Emmanuel Macron's signature to become law.

The sixty businesses that chose to register under the country's current two-tier system will not be impacted until the new, European-wide standards take effect, said reports. Reports indicate that companies can choose to operate under the current system by registering simply with the local financial authority, L'Autorité des marchés financiers, or they can choose to obtain a complete license, which involves additional disclosure. A higher level of license has reportedly not been chosen by any of the French companies with registered offices.

Despite resistance from the industry and other legislators, an agreement was reportedly reached that is expected to remove the option of simple registration for new market participants but permits those already in operation to continue until the EU's crypto legislation becomes effective. Reports indicate that the EU's Markets in Crypto Assets (MiCA) regulation could be passed as early as April 2023, but it is unlikely to go into effect until 2026.

France's initiatives to position itself as Europe's crypto hub have reportedly resulted in the establishment of companies such as Binance and in the country. However, the implementation of MiCA, which aims to standardize crypto rules across the European Union, could reportedly impact the nation's significant investment in the sector.

Large crypto firm, Digital Currency Group, declares loss of US $1.1 billion for 2022

Digital Currency Group (DCG), a US-based global crypto firm, declared a US $1.1 billion loss in 2022 due to a drop in cryptocurrency prices and the reorganization of Genesis, its lending platform. Reports indicate that the Three Arrows Capital default also had an impact on Genesis.

DCG reportedly had US $5.3 billion in total assets as of 31 December 2022, with $262 million in cash and cash equivalents. The company reported its fourth-quarter revenue at $143 million, with a $24 million loss, and consolidated revenue for the year was $719 million. However, despite the losses, DCG claims to have achieved a significant step in the restructuring of Genesis, reportedly securing a non-binding term sheet agreement with a few of the major creditors.

The restructuring of DCG's $1.1 billion promissory note due in 2032 and the extension of DCG's May 2023 obligations to Genesis Capital to June 2024 are both reportedly included in this agreement. Additionally, creditors of Genesis Capital are expected to receive a new class of DCG redeemable, convertible preferred shares. The final transaction agreements and votes on the restructuring plan are expected to be a lengthy process, said reports.

Nexi to purchase Bank Sabadell's payments division for €280 million

Banco Sabadell, a Spanish-based financial firm, has reportedly agreed to sell 80% of its merchant acquiring business to Nexi, a European payment technology company, for €280 million. Furthermore, a long-term distribution agreement worth ten years has been negotiated between the companies, with two potential five-year extensions.

Nexi is expected to pay €280 million upfront in cash for its investment in PayComet, a subsidiary of Sabadell that handles payments, and to acquire over 380,000 merchants with approximately €48 billion in transaction volume reported as of December 2022.

Paolo Bertoluzzo, CEO, Nexi, noted that Spain is a market that is comparable to Italy in that it is highly appealing for digital payments with significant potential for long-term, profitable growth.

Pagos, a US payment technology firm, secures US $34 million in Series A funding

Pagos, a US-based provider of digital payments, has raised US $34 million in a Series A fundraising round coordinated by Arbor Ventures, a global fintech-focused venture firm. Existing investors, including Point 72 Ventures, Infinity Ventures and Underscore VC, who led the company's $10 million seed round in 2021, have also participated in this round.

The payment intelligence company, which was established in 2021 by former executives from Braintree, Venmo, Paypal, Stripe, eBanx, Klarna and Apple, aims to assist organizations in transforming dispersed digital payments data into understandable, useful insights. Any business that sells or bills online could optimize their payment systems and increase revenue with the support from the software-as-a-service platform without having to change their current payments infrastructure, said reports.

Pagos intends to increase the size of its engineering staff as well as advance the development of its product line with the new round of funding. With clients such as Adobe, Eventbrite, GoFundMe and Warner Bros. Discover, Pagos boasts to have processed more than one billion transactions thus far.

Like this item? Get our Weekly Update newsletter. Subscribe today

About the author

Also see

Add a comment

New comment submissions are moderated.