City officials have warned that London’s status as Europe’s financial capital will be seriously jeopardized if the Treasury Department and the Bank of England are slow in adopting the digital sterling.
Rishi Sunak said last month that the Treasury Department was considering releasing a so-called “Britcoin” one day, but that no decision had been made.
Sunak said the digital pound would “exist as a complement to cash and bank deposits” if introduced by the BoE.
Daniel Hodson, former head of the Nationwide Building Society and the London International Financial Futures and Options Exchange, told City AM that any digital currency from the UK central bank must instead target the financial services sector.
It has been widely argued that the use of the digital sterling will make commercial financial transactions faster and cheaper.
Hodson said that if the EU, which is laying the foundation for a digital euro, introduces a digital currency before the UK, it will likely steal masses of clearing activity from London and damage the city’s post-Brexit image.
“The City of London’s euro-denominated financial markets, which include decision making, transactions, clearing and settlement, have been under constant attack since Brexit, initially in relation to cash transactions,” he said.
“However, the city’s multi-currency and cross-product, deep and diverse markets and the associated clearing and settlement activities and institutions have so far largely protected them from any demarche on EU financial centers.
“An early wholesale-run Euro CBDC, ie before any sterling model, would provide an immediate opportunity to quickly move the bulk of euro-based transactions from London to the continent, probably primarily for the benefit of Paris based on cost, speed and Capital savings related to its use. “
China has already outlined concrete plans to introduce a digital renminbi, making it the first digital central bank currency.
The Treasury Department and the Bank of England recently set up a task force on the digital sterling, the report of which is expected to be released later this year.
However, some in the city are concerned that this will only throw the problem into the grass.
Peter Randall, founder and CEO of the pan-European stock exchange Chi-X Europe, said the Treasury Department needs to prioritize this review and possible launch.
“London is in good shape, but it depends on the government pushing the Bank of England and the Treasury to get things started,” he said.
He also called for the BoE to consult a wider range of businesses and stakeholders in the city as part of its review.
“Asking incumbents for an opinion on innovation and change would be a bit like asking the wooden navy for their views on the sub,” he said.
“It’s that awesome.”