New Britcoin Taskforce Elevates Role of Blockchain in Global Finance World

April 22, 2021

The British Treasury and the Bank of England (BoE) announced this week they are considering a new central bank-backed digital currency, dubbed "Britcoin," based on blockchain. A taskforce has been launched to begin exploratory work on the potential central bank digital currency (CBDC), according to Rishi Sunak, British finance minister.

The new digital currency would enable both consumers and businesses to hold their accounts and lending obligations directly with the BoE, skipping over other lenders' roles in the current system. The BoE has previously said that bitcoin does not act as a stable store of value and is ill-suited to serve as a currency.

A central bank currency would mean that the firm Fnality, formerly known as the Utility Settlement Coin (USC), would be able to go live. Fnality, comprised of 15 major financial institutions, aims to enable banks to settle with each other on blockchains using tokenized money based on a common account at the central bank.

The system would be useful for banks that wish to conduct securities settlements, like bonds, on a blockchain. The use of Fnality would enable instant settlement and also remove counterparty risk.

Fnality takes advantage of a permissioned blockchain based on Ethereum's framework. When banks use Fnality tokens to make payments, the solution transfers money from their central banks accounts to a Fnality omnibus account, which tokenizes the funds. The tokens may then be used to make a payment, and recipient banks may then choose to convert the tokens back to central bank money or use the tokens for other payments.

“It is exciting to see this development from the Bank of England supporting the opportunity to use tokenized cash assets on next generation payment systems, enabling on-chain wholesale exchange of value,” said John Whelan, managing director digital investment bank & innovation, Banco Santander. Whelan led Santander’s issuance of a digital bond on the public Ethereum blockchain.

“Having been involved from the start of the Fnality journey, it’s great to see the publication of this policy,” said Hyder Jaffrey, managing director, head of principal investments, UBS Investment Bank. “It highlights the progressive and forward-thinking approach taken by the Bank of England to support innovation in global payments. This approach will enable us to develop new settlement models, bringing significant market benefits to all stakeholders.”

Edited by Maurice Nagle

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