More #Britcoin

Bank of England Governor Bailey launches discussion paper on difficult questions re “stablecoins” and CB digital money” - “prospect of stablecoins as a means of payment & emerging propositions of CBDC have generated a host of issues..” bankofengland.co.uk/paper/2021/new…
BoE: “opportunities can only be realised if new forms of digital money are safe. They could be privately provided – in form of ‘stablecoins’. Or they could be publicly provided – in the form of a central bank digital currency”..“precautionary arrangements may therefore be needed”
“new forms of digital money are assumed to be denominated in sterling. Unlike cryptoassets such as Bitcoin, which do not have an anchor, they are also assumed to be backed by assets that make them stable in value...”
“stablecoins must promise, credibly and consistently, to be fully interchangeable with existing forms of money. In other words, they must be anchored. This is essential for ensuring that users have the same confidence in stablecoins as commercial bank money”
Bank of England say that stablecoins will lead to more credit coming from non bank sector, could increase cost of credit in banked sector, it may therefore have a transition period where it could “limit migration” to new forms of digital money
Digital money could increase the speed of bank runs in a crisis too, BoE suggests.

To be used as “money” stablecoins would need to abide by certain regulatory norms: “legal claim, capital requirements, central bank support during stress, & a backstop to compensate depositors”
Illustrative BoE scenario is a fifth of UK bank deposits migrate to a safe digital currency, because thats perceived as more safe than uninsured bank deposits (ie those above £85k) this pushes up funding costs, lending rates at banks, and pushes down their provision of credit... ImageImage
This would disproportionately affect household lending, as it is predominantly done by banks, unlike commercial lending which is 50:50 banks/ non banks

This is why the BoE says it might want the power to limit flows into digital money in a transition.
A bit techy, but it is totally fascinating, with profound implications for sovereignty, financial stability, growth, but also privacy, tracing of transactions. will the commercial banks start issuing stablecoins, as a hedge against losing deposits? Shd they be backstopped by BoE?
Important bit on privacy implications of new digital money, given every transaction tracked, timed, geolocated etc...

One big thinker in the area thinks in more distant future Government would be able to use this for localised stimulus packages in certain towns or postcodes... Image

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More from @faisalislam

10 Jun
On record yesterday, Biden’s adviser Jake Sullivan told @BBCJonSopel of the President’s “very deep concern” on this issue, but didn’t get in to much granular detail…Times reporting private comments from last week suggests more detailed engagement, in particular re US trade deal
This was US Trade Rep on record last month asked about whether she would extend trade negotiations already done with UK - volunteered the administration was “keeping eye” on NI situation in relation to US-UK trade
very interesting thing in Times story is suggestion of specific incentive the US communicated to UK Gov to align agricultural standards with EU in order to solve some of the Protocol problems (EU long suggested this) - and that this wouldn’t affect chances of US-UK trade deal…
Read 4 tweets
8 Jun
Fascinating White House briefing on US economic strategy re supply chain resilience - significant changes to gov backed funding, trade retaliation “strike force” when other countries stitch up supply chains, etc batteries, semiconductors etc, rare earth:

whitehouse.gov/wp-content/upl…
This is the US trade agenda right now, and why they are in no hurry to sign any trade deals right now - much more interested in altering the current structures of trade, in particular where it perceives China has strategically stitched up supply chains for future industries…
this is quite a sharp departure in economic approach - not at all concerned with spreading “free trade” as an end in and of itself, its a recognition that if China acts so strategically, so will the US...they’re even going to divert export trade credits to fund domestic factories
Read 4 tweets
7 Jun
We knew Biden admin “going big” on fiscal support for its economy, but extraordinary to hear first hand from US Treas Sec Janet Yellen, that now, was time to “do more”, not even think about phasing out support, & this applied to rest G7, ie incl UK. Sets tone for #G7UK Cornwall Image
Given tax deal focus, this might have been missed at G7 -
judging timing & pace of the withdrawal of crisis support, against backdrop of record borrowing and rising inflation = THE fundamental economic judgement call.

US saying choice clear for all: /1

bbc.co.uk/news/business-…
2/ key analytical point Yellen pointed to: US being forecast to regain economic output lost in pandemic first in G7, thanks to vaccines & stimulus.

That, she said wasnt enough, all G7 econs:
- should aim at “returning to pre-pandemic growth paths” - & had fiscal space to do so
Read 6 tweets
6 Jun
There was published Government impact assessment at the time in late 2019 that detailed much of this stuff (thread linked) ... also a leak of a document from HMRC that also listed impact of new non tariff barriers within the UK created by the deal

leaked HMT document actually and included the phrase “highly disruptive to the NI economy” in relation to physical checks both ways (not all have so far materialised)... and that imports into NI were facing (in extra checks) “a tariff equivalent of 30%”

Typo - Tariffs equivalent ON 30% of purchases, is what the 2019 document said...
Read 6 tweets
5 Jun
Deal Done - historic agreement on multinational tax agreed at G7 finance meeting in London… quite a moment.
Just spoke to Irish finance minister Pascal Donohoe here at G7 - I asked him if this was the end of Ireland’s years old business model said Ireland will continue to be competitive in the change that is coming” and he will continue to make case for legitimate tax competition
NEW US Treasury Secretary Janet Yellen in the conclusion of this tax deal…
Says US will be first to return to pre pandemic output, and whole G7 have “fiscal space” to speed up recoveries and the conversation should be more “what more can we do now”…
Read 9 tweets
4 Jun
NEW:
Just spoke to French fin minister Bruno Le Maire at G7 in London.

We are “just 1mm away from an historic agreement” - says countries such as Ireland need to get “on board”.

Remaining sticking point - min tax rate, 15% “only a starting point” excl on @BBCNews channel soon
Le Maire: rate is “most tricky difficulty, and I think that if the negotiation is still underway, that's because we are still working on these really tricky points of the rate”..

“clearly 15% is only a starting point. And if it can be higher, it is better to have a higher level”
“we are spending a lot of public money to protect our economies against the consequences of COVID, and to have a quick and v strong economic recovery, but we need money, & we need new resources, I would think that these new resources are the right ones and useful for all of us.”
Read 7 tweets

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