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UK targets fintech support as Bank of England eyes CBDC

The Bank of England (BoE) and HM Treasury have announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential UK CBDC. A CBDC would be a new form of digital money issued by the Bank of England and for use by businesses and households. It would exist alongside cash and bank deposits, rather than replacing them.

The UK government and the BoE have not yet made a decision on whether to introduce a CBDC in the UK, and will engage widely with stakeholders on the benefits, risks and practicalities of doing so.

Taskforce goals

The Taskforce aims to ensure a strategic approach is adopted between the UK authorities as they explore CBDC, in line with their statutory objectives, and to promote close coordination between them. The Taskforce will:

  • Coordinate exploration of the objectives, use cases, opportunities and risks of a potential UK CBDC.
  • Guide evaluation of the design features a CBDC must display to achieve our goals.
  • Support a rigorous, coherent and comprehensive assessment of the overall case for a UK CBDC.
  • Monitor international CBDC developments to ensure the UK remains at the forefront of global innovation.

The Taskforce will be co-chaired by Deputy Governor for Financial Stability at the Bank of England, Jon Cunliffe, and HM Treasury’s Director General of Financial Services, Katharine Braddick. As appropriate other UK authorities will be involved in the Taskforce.

New forums to explore the topic

The BoE has also announced the creation of two new forums.

A CBDC Engagement Forum

This is to engage senior stakeholders and gather strategic input on all non-technology aspects of CBDC. The Forum will have an important role in helping the Bank and HM Treasury understand the practical challenges of designing, implementing and operating a CBDC. It will consider issues such as – but not limited to – ‘use cases’ for CBDC, functional needs of CBDC users, roles of public and private sectors in a CBDC system, financial & digital inclusion considerations, and data & privacy implications. Members will be drawn from financial institutions, civil society groups, merchants, business users and consumers.

A CBDC Technology Forum 

This will engage stakeholders and gather input on all technology aspects of CBDC from a diverse cross-section of expertise and perspectives. The Forum will have an important role in helping the Bank to understand the technological challenges of designing, implementing and operating a CBDC. Members will be invited by the Bank and drawn from a range of financial institutions, academia, fintechs, infrastructure providers and technology firms.

The BoE has also announced it will establish a CBDC Unit. This new division of the Bank of England will lead its internal exploration around CBDC. It will also lead the Bank’s external engagement on CBDC, including with other UK and international authorities. The Deputy Governor for Financial Stability, Jon Cunliffe, will oversee the work of the CBDC Unit.

Plans to boost UK fintech and financial services 

The BoE and UK Treasury exploring the possibilities of a CBDC is part of an overall revamp of fintech and finance set out by Chancellor Rishi Sunak this week. Speaking at Fintech Week, Sunak set out proposals to enhance the UK’s competitive advantage in fintech, from regulatory support and reforms to help firms grow, in addition to the taskforce to lead the UK’s work on a CBDC.

Building on opportunities generated since the UK’s departure from the EU, the Chancellor confirmed the UK will be taking forward many of the recommendations made in the recent Fintech Review, led by Ron Kalifa, and the Listing Review, led by Lord Hill.

To support fintech firms to scale up, the Financial Conduct Authority (FCA) will take forward a ‘scale box’ - a package of measures to enhance its pioneering regulatory sandbox, which has been invaluable for allowing start-ups to test new propositions, and to provide a one-stop shop for growth stage firms.

It will also launch the second phase of its Digital Sandbox to enable firms to test concepts that tackle sustainability and climate change-related challenges, helping to deliver a greener financial sector that supports the transition to net zero.

The Chancellor also backed the creation of an industry-led Centre for Finance, Innovation and Technology (CFIT) and committed to work with regional and national fintech bodies to make it a reality. The CFIT would work closely with the regional hubs to identify and address sector challenges in support of fintech growth across the UK.

These initiatives build on announcements made at Budget 2021 to help fintech firms access the talent they need, which included a new ‘scale up’ visa stream allowing skilled people with a job offer at a recognised UK ‘scale up’ to qualify for a fast-track visa without sponsorship or third party endorsement.

Reforms to listing and capital markets rules

In a further boost for innovative companies seeking to raise money in the UK, the Chancellor confirmed how the Government will take forward all the recommendations directed towards it by the Listing Review.

As part of this, the UK will consult on changes to its prospectus regime - which governs the information a company must publish when raising finance - this summer, to ensure the rules are not overly burdensome but provide investors with the information they need, tailored to the type of transaction.

The consultation will also explore how to make it easier for companies to provide the forward-looking financial information investors want to see, which would particularly benefit technology and life sciences companies with high-growth potential, and their investors.

A group of experts will also be convened to look at how to improve the efficiency of rights issues – when a listed company invites its existing shareholders to purchase additional new shares – and the role technology could play in streamlining the process, as recommended by the Review.

Separately, reforms to the UK’s wider capital markets regime will also be consulted on this summer, including proposals to delete the share trading obligation and double volume cap. The consultation process aims to deliver a rulebook that is fair, outcomes-based and supports competitiveness, while ensuring the UK maintains the highest regulatory standards.

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