Financial news

Year in, and year out, people continue to wonder how long the crypto hype is going to continue. The volatility of the market and the crashes it has faced keep leading some to believe that the digital currency’s time has come to an end. But without fail, it always pops back up again… why?

This month at The Fintech Times we’re going to be looking at what makes digital currencies so popular. We will also be uncovering the emerging alternatives to cryptos and why the digital future looks so intriguing.

Our second focus this month will be on central bank digital currencies (CBDCs). We continue by finding out more about the progress of CBDCs such as the US’ so-called digital dollar.

Here we gauge the industry’s opinion on the development of the UK’s highly-anticipated ‘Britcoin’ with Okcoin, Carta Worldwide, Tribe Payments, OpenPayd and Quant.

In the pipeline but not a priority

The UK’s recent appointment of Rishi Sunak to leader of the Conservative Party and Prime Minister has triggered “some momentum towards the creation of a Britcoin,” says Jason Lau.

Lau is the COO of the US cryptocurrency exchange Okcoin.

“[Sunak] has previously called for the development of a CBDC by 2025 during his time as the Chancellor of the Exchequer,” continues Lau.

“However, even with a friendly face at 10 Downing Street, I don’t think that a Britcoin will be high on the agenda of Prime Minister Sunak.”

Lau says this is largely due to “financial concerns over inflation, potentially dealing with an energy crisis in Europe, and a public who’s largely apathetic to a new form of payment.”

An up-and-coming form of payment

According to Dante Siracusa, the welcomed development of Britcoin would carry many of the same benefits of CBDCs, while promoting resiliency and innovation within the UK financial system.

Siracusa is the chief product officer at Carta Worldwide, a Canadian fintech specialising in mobile and emerging payments. 

He cites the consumer benefits of wider payment choices and access to digital financial infrastructure.

Siracusa expects Britcoin to become one of the most robust and respected CBDCs because it goes “against affirmed crypto principles of decentralisation and embraces middlemen.”

“In reality, you need middlemen like governments to enforce financial standards that consumers have come to expect of the other financial institutions they use,” he continues.

“Governments and consumers need to trust these new players before they will want to use it and that is where Britcoin has a leg up over industry-led stablecoins.

“The Bank of England may be behind the curve in its development of Britcoin but that will give it time to learn from other CBDC and stablecoin projects and make sure Britcoin is trusted by consumers and enterprises.”

Recognising the downside effect of more government oversight, Siracusa says Britcoin will incur “less privacy for consumers because governments need visibility of CBDC transactions.”

He explains how this oversight is necessary to prevent it from being counterfeited or used in nefarious ways.

“Regulators will have to strike a balance between oversight and privacy in building Britcoin but I’m hopeful they’ll get it right and realise the full benefits of Britcoin,” concludes Siracusa.

Inclusion, oversight and instability

Alex Reddish is hesitant to recognise whether Britcoin will become the UK’s CBDC.

As managing director of the UK payments fintech Tribe Payments, Reddish links financial oversight and increased inclusion as two primary benefits of Britcoin.

He goes on to add cost efficiency and resiliency to these benefits, explaining that it could serve as “a backup option against payment rail failure.”

“The counter-argument for such a fluid environment includes stability,” continues Reddish.

“Jurisdictions do not want an outflowing financial instrument to the point where they are not maintaining any in-country value.”

Losing the race

Daniel Belda also recognises the slow, drawn-out launch of Britcoin. He describes its arrival as “long overdue” with the Bank of England being “extremely behind the curve in exploring its feasibility.”

Belda is the head of product strategy at OpenPayd, the payments and banking-as-a-service platform.

“Many other countries are already in the advanced stages of launching their own CBDCs,” he says.

“Norway, for instance, launched a sandbox for testing a CBDC nearly two years ago while the UK is still in the early evaluation stages.”

Despite the delay, Belda recognises “a clear opportunity in digital currencies.”

“Cash is on the decline so there is obviously a desire for digital alternatives and Britcoin has other benefits than just being a replacement for physical cash,” he says.

“It gives people more options in how they pay for things, which expands financial inclusion and makes the UK financial system more resilient to disruption.”

When it does finally come to fruition, Balda explains how Britcoin’s user-friendliness will be a major learning point for all involved.

“Consumers will need a seamless way to transfer from fiat to CBDCs and back again; they’ll need ways to use it at the till and online checkouts, and convert to other CBDCs when transacting across borders,” he says.

“Fintechs are going to play an important role in getting this right, tucking all that complexity behind excellent user experience and user interface design.”

A considerate approach

“Inflation and the activities of the Bank of England have dominated the financial news agenda in 2022 – and are likely to continue to do so in 2023,” says Gilbert Verdian.

Verdian is the founder and CEO of Quant, the cryptocurrency network enabling the minting od stablecoins by leveraging multi-ledger tokens and various blockchain protocols.

“A well-designed CBDC can help provide a real-time view of risks and currency outflows to help implement specific and targeted measures to prevent financial contagions from spreading further in the event of a crisis,” he continues.

According to Verdian, a digital pound will enable consumers and businesses to automate complex and cumbersome processes and implement logic into money.

“It offers new efficiencies and faster workflows to better meet our needs as our living experience becomes increasingly digital,” he ellaborates.

“Many critics cite privacy and potentially overbearing government controls as barriers to implementation. They are missing that blockchain technology makes it possible to protect the privacy of individuals using zero-knowledge proofs and encryption.

“Also, many countries, such as the UK, are taking very considerate approaches to adoption. Pilots involve extensive public and regulatory consultation, with business and institutional involvement, to ensure that CBDCs meet our democratic needs.

“Meanwhile, with Project Rosalind, the BIS Innovation Hub London and the Bank of England are testing how to issue, embed and settle CBDCs for retail payments use cases with industry participants.

“The project looks to the private sector to innovate different payment use cases and applications that use retail CBDCs for a better experience. The central bank is also experimenting with prototype synchronisation to coordinate settlement processes with Project Meridian.”