A major City group has just published a report calling for an immediate development of an e-pound
Britain could create a Western alternative to a Chinese digital/e-currency
It is not generally appreciated that over 98% of UK transactional banking (by value) takes place in what is known as 'the wholesale market'. Less than 2% takes place in the retail market, which is what most people deal with in their daily lives. This multi-billion daily wholesale market represents a massive opportunity for the UK.
China is already well advanced in their declared aim to launch their version of what is known as a 'Central Bank Digital Currency', by the time of the Beijing Winter Olympics next year.
The EU and the US have also embarked on developing their own systems, but both are potentially hidebound by the usual legal and constitutional morass and bureaucratic delays. Enter the newly-independent United Kingdom, with its 'Sterling Central Bank Digital Currency' (CBDC). On 19 April the Bank of England and the Treasury announced that they were setting up taskforces "to coordinate the exploration of a potential UK CBDC".
A major group representing the interests of the City of London – the CityUnited Project – has been assembling a team of world-leading specialists from the UK including Fintech entrepreneurs, central market infrastructure specialists, payment system architects, City Executives and other specialist personnel all of whom have strong connections with the City of London and the UK finance industry both at a wholesale and retail level.
Today the CityUnited Project has launched its 'Aurora' report
Named 'Aurora' (Latin for dawn), this initiative looks well-timed. It offers the UK first mover advantage for a western alternative to the Chinese CBDC, exploiting the UK's world-leading technology, financial leadership, and innovation, providing benefits for all. The proposal is effectively in two parts:
1. A CBDC for the wholesale sector, representing the bulk of UK banking transactions, involving the BoE and City institutions, followed by
2. Further enhancements designed for the retail sector, improving cost and efficiency for items such as fares, fees and media purchases; and providing simple payment and receipt access for the many still without bank accounts.
The full Briefing Paper is available here.
The CityUnited Project 2021
Going green and levelling up
The Aurora CBDC also aligns fully with the Government's green agenda and climate change laws. A CBDC platform would have a lesser energy signature than any of the individual clearing platforms or payment platforms.
The retail phase will particularly benefit lower income brackets and the currently unbanked through cost and availability benefits, thus falling in line with the Government's 'levelling up' policies.
Conclusion
When complete, the Aurora model can provide significant efficiency, security, and cost benefits across the UK's political, security, economic, social and cultural spectrum, and would meet the Government's green and levelling-up objectives, providing benefits for all.
Commenting on this report, the Rt Hon The Lord Hannan of Kingsclere said: "State-backed digital currencies are coming: that is not in doubt. The question is whether another country will get there early enough to offer an alternative model to China's - a model more rooted in the principles of privacy and private property. Britain, with its concentration of financial services expertise, its fintech hub and its common law system, is ideally placed to be that country."
Commenting further, the head of the Aurora team, the CityUnited Project's Chairman Professor Daniel Hodson, said: "We believe that there's a great opportunity for the United Kingdom to gain 'first mover advantage' in the western world. The Aurora plan is based on proven technology thanks to the existing world-beating expertise and innovative drive of the City of London. If this can be brought together with the kind of 'can-do' approach that Kate Bingham brought to the vaccine rollout, then the UK would be very well positioned to protect and enhance the UK's financial services globally, and to deliver real benefits to every person in the United Kingdom. Our Aurora team is looking forward to discussing these proposals with the Bank of England and HM Treasury and other interested parties and stakeholders in the coming days and weeks."
About Professor Daniel Hodson:
Chairman, The CityUnited Project, formerly CEO of LIFFE, Deputy CEO of Nationwide Building Society, a director of the London Clearing House, Chairman of the Association of Corporate Treasurers and Gresham Professor of Commerce.
The CityUnited Project 2021
About The City United Project
Against the background of so much negativity, the launch of 'The CityUnited Project' in mid-February 2021 might appear well-timed to many people in the Square Mile and beyond. As the CityUnited's Chairman Daniel Hodson put it: "The post-Brexit City and the UK financial services industry stand at the gateway of their greatest era of prosperity and global leadership."
The CityUnited Project: https://www.cityunitedproject.com/
Our Advisory Board includes:
∙ Sir Bernard Jenkin MP (Chairman)
∙ The Rt Hon David Jones MP
∙ The Rt Hon The Lord Lamont of Lerwick PC
∙ The Rt Hon The Lord Hannan of Kingsclere
∙ Anne Marie Morris MP
∙ David Campbell Bannerman (former MEP)
∙ The Rt Hon The Lord Flight of Worcester