Rishi Sunak will ‘make himself available’ to be PM says expert
Chairman of The CityUnited Project think tank, Professor Daniel Hodson, has criticised the “snail’s rate progress” towards launching a Sterling wholesale Central Bank Digital Currency.
Urging Mr Sunak’s Treasury and the Bank of England to act before Christine Lagarde’s European Central Bank takes “first-mover advantage”, Professor Hodson has warned that a significant part of the City’s clearing business is under threat from EU competition unless prompt action is taken.
In April at the UK FinTech Week conference in London Chancellor Rishi Sunak announced a new digital currency strategy.
He said: “We’re launching a new taskforce between the Treasury and the Bank of England to coordinate exploratory work on a potential central bank digital currency (CBDC).” He later tweeted out the solitary word: “Britcoin”.
Daniel Hodson, the former head of the City’s London International Financial Futures and Options Exchange (LIFFE) described London’s dominant position in the clearing and settlement business currently as “hanging by a thread” and that a very significant share would move across the Channel if the Chancellor does not act to accelerate the Bank of England’s slow rate of progress towards a wholesale digital pound.
Professor Hodson’s reaction comes as an ECB spokesperson in Frankfurt confirmed to Express.co.uk they are “undertaking a whole and thorough investigation of all the possibilities” in launching a digital euro by 2025.
Despite the Chancellor’s words, progress in the UK towards a digital pound has been slow according to insiders.
Last month the Bank of England said: “In 2022, HM Treasury and the Bank will launch a consultation which will set out their assessment of the case for a UK CBDC, including the merits of further work to develop an operational and technology model for a UK CBDC.”
Rishi Sunak and Ms Lagarde
Chairman of The CityUnited Project think tank, Professor Daniel Hodson
Professor Hodson argued that City jobs are in danger if the current slow rate of progress continues. Speaking to Express.co.uk the City think tank boss said: “In the mid 90s the City’s floor traded futures and options business was by far the largest in Europe, and indeed led the world at the time. But in 1998 the central German bond contract migrated virtually overnight to Frankfurt due to the impact of the latter’s electronic trading system, never to return.”
He continued: “We’re in danger of not seeing the wood for the trees and repeating the debacle of 1998, when our failure to respond to unstoppable technical development and market events resulted in a significant loss of business to Frankfurt. We must not let this happen again.”
Meanwhile at its Frankfurt headquarters, the ECB has gradually accelerated its plans to launch a digital euro, issuing a 55 page report on October 2, 2020.
On July 14 this year ECB President Christine Lagarde said: “It has been nine months since we published our report on a digital euro. In that time, we have carried out further analysis, sought input from citizens and professionals, and conducted some experiments, with encouraging results. All of this has led us to decide to move up a gear and start the digital euro project.”
ECB President Ms Christine Lagarde
European Central Bank
The former French politician and minister continued: “Our work aims to ensure that in the digital age citizens and firms continue to have access to the safest form of money, central bank money.”
Professor Hodson was emphatic about the need for the Chancellor to react, telling Express.co.uk: “An EU digital currency would act as a massive magnet to draw a large section of the City’s key clearing and settlement business, already hanging by a thread, across the Channel, based on significant cost and capital reductions.”
He added: “Financial markets are neither patriotic nor sentimental, but based wholly on the bottom line. Britain has the know-how, technology and resources to gain First Mover Advantage. All it needs is the will and determination.”
Currently China is thought to be the most advanced in its plans to launch a digital currency, ahead of the Beijing Winter Olympic Games in February next year. If China launches its digital currency by then it will beat the EU, the UK and the US.
Rishi Sunak, Chancellor
Bank of England, London
The discussions about a digital currency come as the euro is about to celebrate its 20th anniversary. Ahead of this, the ECB’s President has just launched an initiative to give euro banknotes a fresh look.
Speaking this week Ms Lagarde said: “Euro banknotes are here to stay. They are a tangible and visible symbol that we stand together in Europe, particularly in times of crisis, and there is still a strong demand for them.”
This news comes after a difficult 12 months for the euro, during which the pound has risen seven percent against the Eurozone currency. In December 2020 the pound bought only 1.09 euros. Today the pound buys 1.17 euros.
ECB President Ms Christine Lagarde
Despite the increase in online card payments during the COVID-19 pandemic, the demand for cash has continued to rise according to the ECB, owing to its “crucial role as a store of value.” In its study published a year ago, the Eurozone’s Central Bank found that cash remained the most popular means of payment for in-person retail payments.
Commenting, Ms Lagarde said: “After 20 years, it’s time to review the look of our banknotes to make them more relatable to Europeans of all ages and backgrounds.”
Ms Lagarde’s colleague, ECB Executive Board member Fabio Panetta, added: “We want to develop euro banknotes that European citizens can identify with and will be proud to use as their money.”
He continued: “The process to redesign the euro banknotes will run in parallel with our investigation on a digital euro. Both projects aim to fulfil our mandate of providing safe and secure money to Europeans.”
As Mr Panetta indicated, in tandem with the project to redesign its banknotes the ECB has also embarked on a project to develop a central bank digital currency. In this endeavour some involved in the UK finance industry are concerned it is moving faster than the Bank of England.