The Bank of England has announced that:
The Bank of England and HM Treasury have today announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential UK CBDC. A CBDC would be a new form of digital money issued by the Bank of England and for use by households and businesses. It would exist alongside cash and bank deposits, rather than replacing them.
I have to admit to being befuddled.
It's good to note the acknowledgement that money is created by the Bank of England.
But the plan is to create a currency that works alongside cash and bank deposits. That's the pound then.
And it's going to be digital. Like 97% of money already is, then. After all, that's all that money in a bank account is now.
And it's going to be used by households and businesses. That's a pretty shocking idea (I jest).
So what might this be about? Almost nothing, I suggest, unless what is really being considered is the use of blockchain.
And that's when I got this idea. It's about creating untraceable money. So here is the Treasury trying to actively undermine HMRC, by the look of it.
I'm not sure what else this ‘new money' would offer.
And as a plan this fits right into the agenda of cronyism. Made for it, you might say.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
I glad I am not the only one befuddled!
Could they mean that the BoE will offer accounts directly to the public? I doubt it but this is the only possible difference to “ordinary” digital currency that I can make out.
And why on earth would they want to do that?
And you can be sure they will not want to offer people credit
So is this ultra-safe anonymous banking for the very rich?
“So is this ultra-safe anonymous banking for the very rich?”
How do they tax it? Or is it intended to be a special, secure, tax-free, audit-trail free currency to the public? These are the only reasons I can think of for creating it. Maybe I am missing something.
I think you have nailed the issue in two lines
100% correct.
This is the best way to help the rich move their money around for free.
And encourage global dodgy geezers to funnel their dosh through UK plc.
And thus curry favour with said ‘dodgy geezers’ so that they will part fund/fund your party’s efforts to stay in power forever.
And there’s fair bit of undermining the sovereignty of the state too since the present Government is full of such people who do not believe in it in the first place.
Does actual cash only make up 3% of UK currency? I am way too economically illiterate to see any advantage of a CBDC. Surely if £Sterling is already 97% in the ether… am I missing something?
You are not missing anything
Yes you are missing the fact that the electronic money we have now is entirely bank created money ,it is not state issued money that a CBDC would be. This electronic money is not backed by the BoE or state in effect and is open to vanishing rather quickly of your bank fails. Hence the govts need to run deposit insurance to stop you taking your money elsewhere, or buying gold, bitcoins ,antiques or stuffing under the mattress. It is a subsidy to the banks to make you keep your money in the risky banking system.
A CBDC has none of those worries since it is entirely backedd by the state and BoE. So it is a very different form of money. At the moment only banks can use BoE backed reserves ,but we could all be using reserves as well. The only people that will object are the bankers.
Vince
After QE these claims are not true
We are in a different era now and you need to chan get your thinking to reflect it, I am afraid
Base money has changed, radically
So too has bank liquidity
And the idea that bank money is not state-backed no longer makes sense
None of your claims stack I am afraid
And the last thing we all need to use is reserves, because then who would make the loans? The BoE will not be, so who is? And how? With what consequence. Again, you really have not thought this through
Vince
After QE these claims are not true
We are in a different era now and you need to chan get your thinking to reflect it, I am afraid
Base money has changed, radically
I agree base money has changed dramatically we are probably at 50 % state backed miney right now. The problems is the banks are not making enough loans, so its dead money.The banks probably will not make enough for the forseeable future because of the lack of confidence in the economy after Covid. The only way to push money where it is needed is for the state to direct money to the correct places, the ones you highlight every day.
We will simply not need to borrow as much from the banks in that case and a lack of credit will not be such a worry, as we simply will all have more money in our pockets. It will also reduce the amounts banks lend for mortgages (if we build enough affordable homes for example) meaning we all get into less debt and banks do not extent their mortgage portfolios and become all the more stable for that. This is a massive topic and interconnected with other issues for sure. I am thinking about the implications here too . Just trying to help : )
Vince
Please read some MMT
No deposit has ever funded a loan in the near history of banking
You really do need to know how banking works before you comment on it here
It’s getting a bit boring that you keep posting misinformation
I am similarly lost.
Either it uses a private ledger and its untraceable or its uses a public ledger which no one would use or it has a ledger only HMRC & the BOE can see which means, again, no one would use it.
I’ve never understood what central banks wants with a “digital” currency.
Rohan Grey seems pretty keen. I still don’t know why. Something about everyone having accounts at the central bank (which could happen now with the currency we have).
Colour me mystified.
We’re overlooking the simplest private digital ledger that already has existed for many years – maybe because it seems too trivial. That is the supermarket gift card, which it totally transferrable. (Many of us bought them from refugees who were allowed 1 £35 Sainsbury’s or Tescogift card a week, so they could have the flexibility of a little cash to spend).
Basically it needs just a few dozen bits of memory to store current balance. No need for any Id info.
The main reasons and benefits of a Central bank Digital Cash are as follows ;
1, We are seeing the demise of cash usage. This means those who do not have bank accounts are excluded from the monetary system. Banks are also closing down ATM’S at a a rapid rate or introducing ATM’s that charge fees. Why should citizens be charged for access to their money?….this is the nations money not the banks money. If we lose access to cash we are forced to use bank accounts and that yet another subsidy to the banking sector….. as if they need another one.
2.It provides a 100% safe from of money. Currently deposits in bank accounts are not 100 % safe and we need deposit insurance from the govt to stop that system failing. This CBDG means we would really no longer need deposit insurance, and banks could be safely be allowed to fail. A big positive as far as many are concerned. Banks would then have to offer more interest on deposits if they wanted to keep depositors happy and also to cover the risk to their money disappearing. This would create a more freer market in money/interest rates and end the states current requirement to act as lender of last resort.
3. It would give the BoE immediate ability to enact monetary policy in that if the govt or BoE saw the need to inject money into the system they could easily using the CBDC eg. via a citizens dividend for example. China has actually introduced a CBDC’s and given away millions in a national lottery as an opening publicity stunt. This gives greater flexibility in monetary policy. It can be loaded onto debit cards or mobile phones or put into special CBDC bank accounts.
4.You don’t need block chain to do this as we already have a electronic payments system. (as you point out)
5.Banks could run these CBDC accounts themselves so this would in fact give the banks or new fintech companies a new product for people to use.
5. It makes fraud less, not more likely, as it is impossible to trade anonymously (as opposed to cash) ,so in that way it will actually reduce the black market.
6. It could be used to affect interest rates. The govt can decide to pay an interest rate on it, which would also then affect bank rates. They could even impose a negative interest rate if they wanted to boost stimulus to spend or stop bank runs.
On that last point the big worry really here is bank runs. In a crisis everyone would dump bank deposits for the CBDc and probably cause a banking crisis. The BoE can of course circumvent that as they please and have done in the past. Besides as Dr Joseph Huber says on the subject, cash and bank accounts have existed side by side for centuries with no problem and the fact that banks are vulnerable to crashes should in no way deter us from trying to introduce one because it will eventually make the money supply more stable as we have less money in the banking sector. As the banking sector reduces in size it will become far less of a liability in a crisis.
Sorry Vince but nothing at all makes any sense in that
Recreating the National Girobank could solve all of that
There is nothing at all in digital banking that helps the unbanked
You could indeed use the Girobank, but its not that user friendly as it exists, as in they don’t have debit cards or any way to use an account to make day to day payments. You would need a complete overhaul of the Girobank to make it of any use as a modern payments bank.
This way the CB or govt does not have to get involved to the day to day running of the CBDC ,that can be left to either the banks or new challenging fintech companies that will do the technical work of getting the money moved quickly and efficiently. They would hold CBDC accounts on behalf of depositors and depositors get the chance to hold some safe money that doesn’t fund shady bank lending(who has the time or inclination to check what banks do with their lending?) or risk the bank failing. All in all would give us a smaller safer banking sector as well.
There is a massive amount going for it.
Tye Goirobank we have is useless
I meant a free proper banking service
And that is what we need
Not a tech nonsense
I seriously wonder from your second para whether you understand banking at all. Depositors never fund bank loans
“Recreating the National Girobank could solve all of that ”
Quite
CBDC could more easily preserve the bank payment system tho’, which would otherwise have to be – and should be now – actually nationalised in order to preserve it from any future bank failures.
I have long argued that
But that is just a tech change
It is not new money
I would repeat the govt doesn’t want or need to get involved in running banks. That is best left for the private sector.
As to banks using depositors money funding bank loans. They do actually. Richard Werner explains it very well in his book “Where does Money come from” .When a depositir nmakes a deoposit the bank has a deciosn to make ,how much money to keep aside to cover daily withdrawals. Before 2008 they only kept £1.27 out of every £100 deposited ,that is now more like £7. In effect they are borrowing from rest( £93) from the depositor with which they use to effectively fund/maintain loans. It is just a form of cheap borrowing to a bank.
Banks do act as both mediators and creators of money.
Ric hard Werner does not say that
And nor does the BoE
Loans never require deposits
Richard Werner went out of his way to prove that
If you continue posting like this expect to be deleted
Tax Evaders Charter 2021.
Don’t need “tax havens” anymore.
Just when some of the world was finally catching-up to the tax crooks.
Who would have guessed?
Mind you, with the govt being the worlds least expert digital vendors…
Does a digital currency like bitcoin really create untraceable money?
I thought every transaction in bitcoin is traceable on the register for that currency. If the state is running the particular currency being considered i can see some distinct benefits for them. Every bitcoin transaction at present incurs a very small fee as part of each and every transaction. For the state system this could effectively be a tax on every transaction at the very point the transaction is carried out. Great for state cash flow I would have thought and no more discounts from plumbers for cash payments if a bitcoin type system was ever fully implemented.
Ask those who have lost their bitcoins how traceable they are
Bitcoin is sold on the basis of its anonymity
Offshore would love an anonymous sterling infrastructure, I am sure
Bitcoin and all other crypto curencies are completely anonymous, because block chain allows that. Bitcoin is designed in a way that it has become the drug dealing money laundering money of choice. A CBDC that just uses the current electronic payments system like Swift, would be far better as there would be a way to investigate all payments of there was sufficient suspicion of fraud/money laundering ,as is currently the case. Some object to a CBDC precisely because it is not anonymous like cash, but that is a tax evaders arguments that has no real merit.
So we do not need a CDBC then
Creating a new digital reserve currency is very unlikely to have any serious impact expect on those who never, ever, want to borrow
Let’s call them, the rich then
Rumour has long had it that the idea is to compete and do away with the private banks leaving the world’s central banks as the sole issuers of national currencies (I assume notes and coins will have to go too) with all the potential power for abuse that brings. The main attraction would be that anyone overly critical of govt could simply have their account switched off leaving them in a rather precarious position, and also that negative interest rates could be introduced to the discomfort of the nation and the profit of the CBs. I don’t know how practical that would be in practice as I can’t see it being beyond the abilities of the open-source community to whip a digital versionof the lumpy mattress. Anyway, we’ll see what the future holds. China’s doing one too, by the way.
I should amend this to make clear, everyone would have a bank account with the central bank and nowhere else, granting monopolistic authority to the CB which would of course be a huge change to its function. This wouldn’t bother the globe-trotting wealthy as other, foreign options would always be available to them – let’s not forget Boris has already made provision for them to travel while the rest of us stay put – but to the less well off, and don’t forget, when Covid/Brexit really make their mark there’s going to be a lot more of the less well off than there are now, this idea of one bank to rule them all and only that one bank being available to them will leave them vulnerable to whatever charges that bank chooses to make. It all sounds a bit far-fetched and yet, and yet, and yet… one glance at the gesticulating buffoon we have as PM reveals a dystopian present so an even more dystopian near-future isn’t so hard to envisage.
I agree….
He’s just playing the part of “Blundering Buffoon”.
In real life he is an egotistical, nasty, person.
I doubt he has any friends, especially married ones.
I’m completely out of my depth here and thoroughly confused. My simple understanding is that the present national currencies (GBP, USD, EUR etc.) are digitally created, theoretically without any limit other than human wisdom.
What comes to mind from what little the Bank of England has said so far is that the proposed new currency shall be of a like nature to Bitcoin and its present-day competitors. I tend to see these as commodities in that they are ‘mined’ into existence and consequently have limited supply due to the exponential increase in the cost of ‘mining’ as time goes by.
My confused question is, then, what part of the legal framework underpinning the structures and operations of the Bank of England permit it to deal in any way in these ethereal (nay, ephemeral) goods?
I am quite certain that the BoE will only issue sterling
What this is all about is very hard to fathom
You are right to be confused
“I am quite certain that the BoE will only issue sterling”
Shall the man-in-the-street be able to tell the difference between the new ‘magic’ money and that which is created at present by the BofE and by the private banks?
An Orwellian scene comes to mind in which some pounds are more equal than others….
🙂
I am not confused (although this blog may be a better judge of that than me).
To me, this is nothing but minority vested interests being pursued through the machinery of a democratic State with the help of some very dodgy politicians – it’s the next stage of ‘The Chumocracy’.
You maybe right
Now I really am confused.
On the one hand I am told that if I use a blockchain/crypto/digital currency for my criminal activities, the transactions will be untraceable.
On the other hand, I am told that cryptocurrencies have value precisely because of their digital trail.
I can see great advantages for tax and legality from a digital currency that leaves a complete trail of transactions.
Surely, what would determine whether it was used or not, would depend on the nature of any Government guarantee?
This will be sterling
It already has a government guarantee
What else are you looking for?
But doesn’t the transaction trail for sterling require the honesty of accountants, an area where you sometimes have reservations?
Yes
But you think a ledger will change that?
Data always needs interpretation
Some years ago I knew socially some very gifted Mathematicians – they were recruited with offers that could not be refused to go work in Blockchain academic research and development in – Australia!
I tell you it takes a LOT of incentive to leave cushy tenure and consultancy in London.
Secondly I still hold the conviction that all such major geopolitical Power games of which Money is just a weapon are the cause of most of our daily miseries and fairytale addled handbag economic certitudes. A fool refuses to believe he has been fooled and carries on being a fool.
This to me seems like the next stage of the ‘liberation’ of the City and its Freeport status 25 miles / 40 km from an actual unnecessary Freeport in the SE…
Finally for now for these who think this is something to do with anonymous wealth avoiding transactions and the disappearance of a ‘cash economy’ :-
A) People will always easily invent a surrogate currency for the situation. Prisoners use Cigarettes, Drugs, Mobile phones etc. All such things mean that the cash economy does not disappear by withdrawal of cash from circulation. We are after all just prisoners in the Bankers world and have been for half a millennia.
B) the greatest Global Warmongering Bankers and Robber Barons have happily been using ‘ART TREASURES’ as the proxy tokens – when such ‘major’ pieces come up anonymously at auctions every few years it is just to rebase them against the currency – true inflation can be accurately judged by that – before moving back into anonymity where god knows how many transactions they are used in as Tokens.
You don’t need a crypto (limited) when you already have such relatively ‘fixed’ quantities of ‘Art’ (which is only added to by promoting a old or new artist into prominence).
These considerations seem to point to the slippery slope grand plans for the next hundred years of hegemonic Power. Thankfully it all appears to be in vain as they lose; to the decoupling of brave nations from ancient bondage and common defence and security treaties away from the Unipolar Allpowerful Ancient Imperialism under its many guises.
You are right re art
This is widely known
Your observation about ‘Art’ is well made, especially in the case of those who may still believe aesthetics plays the most significant part in the matter. I recall being informed that when the quite exceptional collection of Chippendale furniture in Dumfries House (Ayrshire) was on the point of sale, the most valuable piece estimated for sale by the auction house was a modestly scaled bookcase (if my recollection is accurate). There were other larger, grander pieces in the House; but the reason for this choice as the totemic, highest price piece for the sale was that in the world of top-end art collection, that piece of furniture was deemed uniquely saleable because it was of the appropriate size to fit an acquisitive 21st century art collector’s life-style, in a modern apartment in New York, London, Paris or Shanghai. Money and markets operate according to their own rules.
The sale did not go through and the house and Chippendale furniture, which was designed for the House, were rescued and may be visited in Dumfries House by the public.