Fintech Money: Going Mainstream, Remaking Money Digital

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The Bank of England has announced its taskforce to create the digital Pound in an announcement echoing a remarkably similar announcement from the ECB (European Central Bank) who’ve set a timescale of four to five years – with decisions being formed and made now. So the clock is now ticking in the countdown to fintech money. But how did we get here and are we set to lead the world?

In January 2009 Bitcoin’s genesis block was famously mined by Satoshi Nakamoto.

In April 2021 the world oldest established central bank joined the revolution, announcing not just its Central Bank Digital Currency (CBDC) Taskforce – with the e-£ (the digital Pound) quickly dubbed the ‘Britcoin’ by the press. 

But it wasn’t the first – far from it in fact. By this time according to BIS (the Bank of International Settlements) 86% of Central banks around the world are similarly engaged with remaking their national money digital.

Fintech, like most success stories, has a disputed history – with revisionism clearly evident to those of us who lived through it.

Over eight years ago in August 2012 this outspoken article appeared making the then seemingly outrageous suggestion that the UK financial regulator should not only support financial innovation but, in order to do so, it should create an ‘Innovation Unit’. Embracing, rather than merely tolerating, financial innovation, saying This is no small matter and could be crucial to our future as a nation”.

“The FSA should create its own innovation unit, with a seat at the top table… 

This is no small matter and could be crucial to our future as a nation…

A small unit whose job it is to challenge and balance the thinking of the regulator right in there at the start”

Pointing out that given this change Fintech could play a major role in the future of UK PLC – and help redefine our place in the world. (It did not use the word ‘Fintech’ because it was not yet in common use.)

And so it has proved. It took far longer than it should have – 20 months of campaigning before it was announced and over two years to launch. But the Innovation Unit has proved such a great success that it is an idea that has now been copied around the world.

Now Fintech is poised to remake money itself – digital.

The Chancellor, Rishi Sunak, has also supported a central bank digital currency taskforce so the UK can “lead the digitisation” of finance. Announcing a joint taskforce with the Bank of England to creation of the digital pound at UK Fintech Week 19th April Chancellor Rish Sunak said: 

“The UK is already known for being at the forefront of innovation, but we need to go further. The steps I’ve outlined today, to boost growing fintechs, push the boundaries of digital finance and make our financial markets more efficient, will propel us forward. And if we can capture the extraordinary potential of technology, we’ll cement the UK’s position as the world’s pre-eminent financial centre.”

But things look very different, depending where you stand – both geographically and in other dimensions. Those steeped in the innovations of the cryptosphere well know that the Bank of England is very much on catchup – no matter what the Chancellor says. 

The variety and pace of innovation in crypto and DeFi (Distributed Finance) would make anyone’s head spin and it is other places; Switzerland, China, the Bahamas and even Cambodia who’ve been able to steal a massive lead on both the USA (who’ve yet to announce) and the UK.

But announce they will – and compete. Because despite the identical tone of the UK on the e-£ and ECB (European Central Bank) on the digital Euro – that this is a decision yet to be taken – this is, in fact, a foregone conclusion. China has made it so.

When Two Worlds Collide

China is quite simply years ahead with not just plans but action both internally and globally – and is arguably now starting its second wave.

The first was provided by and Ant Group’s Alipay, Tencent’s WeChat which have already transformed payments to an extent unrecognisable elsewhere – with pay-by-QR codes a common sight wherever you look or buy – from vending machines to market stalls and major retailers. Many people no longer carrying cash.

The second wave is not in the planning but is a reality and has already started, with city-wide ‘trials’ of their CBDC the e-Yuan (aka e-CNY) now active in at least four cities including Shenzhen. China embraced Blockchain early and has been working on this for at least six years.

Just published Cashless: China’s Digital Currency Revolution opens a fascinating window into this phenomenon – and some important insights into the thinking behind it. Pointing out that it is not just a new currency but part of an overarching strategy to provide widely available global infrastructure for the future that is independent of the US / dollar hegemony, that has been so ‘weaponised’ by Washington. Reducing or removing their reliance in the US-dominated SWIFT international payments system.

LIBRA and the Great Debate

It was at London Fintech week Monday the 8th of July 2019 that I led a ‘Great Debate’ on the future of money in light of Facebook’s recently announced and highly controversial LIBRA predicting that this, finally, would provide the wake-up call that central banks across the world so badly needed.

So it has proved. While there was purely theoretical interest in the world’s central banks prior to this it was the Libra debacle that finally stirred action amongst a group of institutions used to a peaceful monopoly.

Which provides an interesting contrast with what is emerging now from China. That their own chief Fintech providers, who led the first wave in payments, Tencent and Ant/Alipay have been intimately involved with the PBoC (People’s Bank of China) since early 2018, providing technology and expertise.

While the Bank of England announcement is an important milestone it’s difficult to credit the Chancellors boasts and assertions in the light of all this.

Yes, as well as a taskforce and a consultation it announced the creation of a CBDC department within the Band of England – in itself a clear signal that it means business, belying the ‘exploratory’ framing of the announcement.

But this is little and late – very late. 

The world is now on an irrevocable course. Like it or not it is remaking money digital. 

The biggest systemic change since the web – and, arguably, the creation of money itself given the paradigm shift, and scope for innovation, it presages. 

We may be ahead of the USA but that is no longer to say that we are ahead of the world – let alone “global leader in financial services”. Not by a long chalk. 

Clearly China can no longer be dismissed or ignored. The Kalifa review is a decent start but in this context not nearly enough, even if fully implemented, to get us anywhere near that position.

So if Rishi Sunak is at all serious about keeping up – let alone the UK leading the “digitisation of finance” – it’s time to up the game very considerably.

To take a leaf out of China’s Fintech book – to get behind and make the most of the very considerable Fintech talent available.

  • Barry E James is a founder of public engagement initiative RemakingMoney.com and founding chair of the BBFTA.org (British Blockchain and Frontier Tech Association). He is an author and columnist, notably for CityAM’s CryptoInsider, and is a visiting fellow at the University of Portsmouth Business School.

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