The UK Financial Conduct Authority (FCA) released a report on crypto asset usage within the country on the same day the Bank of England announced they had been selected to host a centre of the Bank for International Settlements (BIS) Innovation Hub – with a work agenda that includes “…central bank digital currencies, global stablecoins, payment innovations, the impact of big tech on financial intermediation, regtech and suptech, fast-paced electronic markets, and digitalisation of trade finance.”
The #BISInnovationHub is expanding with four new centers and a strategic partnership across Europe and North America over the next two years in collaboration with local central banks https://t.co/0BCdcrEFeY @bankofcanada @ecb @bankofengland @riksbanken @NewYorkFed pic.twitter.com/vtw9jBy2jl
— Bank for International Settlements (@BIS_org) July 1, 2020
While the FCA research paper focuses on local adoption of cryptocurrency within the UK, the BIS Innovation Hub is a major worldwide program.
Along with the existing hubs in Hong Kong, Switzerland and Singapore, the UK will now join additional centres to be established with the USA Federal Reserve, the Bank of Canada, the European Central Bank (ECB), Denmark’s Nationalbank, the Central Bank of Iceland, the Central Bank of Norway, and Sweden’s Riksbank.
Growing Cryptocurrency Awareness
The FCA works with the UK Government and the Bank of England as part of the UK Cryptoassets Taskforce as well as liaising with international regulators such as the Financial Stability Board (FSB) and the International Organisation of Securities Commissions (IOSCO).
According to the FCA, although the number of British citizens dealing in cryptocurrency is still relatively small the figures have increased significantly over the previous year, going from around 1.5 million to 2.6 million (just over 5% of the adult population). The findings also established that public awareness of cryptocurrencies has also risen from 42% of the population to 73%.
Two specific groups were used to compile the research at the end of December 2019 to provide a representative picture of the country’s engagement with crypto assets. An online sample of 3,085 people were asked if they had heard of cryptocurrencies. The 73% who answered “yes” continued to complete the remainder of the questionnaire. A further 493 individuals who had previously confirmed ownership of digital assets were also asked to complete the survey.
Position of the Bank of England
In March this year, the Bank of England (BoE) released their own document on the merits of a Central Bank Digital Currency (CBDC) and asked the public for their feedback.
The previous bank Governor and current board member at the World Economic Forum and chair of the FSB, Mark Carney, had stressed the need for implementation of cross-border payments based on distributed ledger technologies (DLTs) and famously advised his fellow central bankers in a speech in 2019 that they needed to “…change the game…” by introducing state digital currencies.
Andrew Bailey took over the leadership of the BoE in March and appears to be on the same page as his predecessor as he has greeted the BIS announcement of the Innovation Hub with enthusiasm. Bailey said that, “Now more than ever it is important the central banking community does all it can to build a more effective, resilient and inclusive financial system, and technology is an important part of that effort.”
He went on to say, “By involving central banks and prudential regulators in this important work, we can help to ensure that innovation is consistent with our objectives of safety and soundness and financial stability.”
Bailey, as Carney before him, understands the urgent need for change.
Looking at the ramifications of the economic shutdowns that have taken place this year, Bailey has previously commented that “We basically had a pretty near meltdown of some of the core financial markets.”