Published on 6 December 2022
Introduction
Plans to introduce Britcoin, a UK Central Bank Digital Currency or CBDC, must continue apace, according to the nation’s second-in-command, Deputy Governor Sir Jon Cunliffe from the Bank of England.[1] The awkward death of real crypto cannot be permitted to upset the Bank’s applecart, and reality and the opinions of the population do not matter at all.
How we got this far
We should not be surprised about this. The Bank of England is simply regurgitating the line taken by its Accounting Department (sometimes called HM Treasury) that it wanted the UK to become a global cryptoasset hub.[2] Accounting Department sent a begging letter to its bosses at the Bank to issue a so-called Non-Fungible Token or NFT.[3] The Bank agreed without comment, maintaining for a time the fiction that it was the order taker not the order giver.
According to the BBC, a Mr Sunak (Accounting’s Financial Controller at the time and now the UK’s Non-Executive Chair) said that ‘We want to see the [cryptocurrency] businesses of tomorrow – and the jobs they create – here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term’.[4]
Britcoin – the Central Bank Digital Currency we are all gagging for even if we didn’t know it
The flagship project in all of this is a ‘stablecoin’ to replace physical cash: a Central Bank Digital Currency or CBDC going by the name of Britcoin.[5] Its legal basis – ‘the safe adoption of cryptocurrencies’ – was promised in the Lobby Pack for the Queen’s Speech on pp. 55-6 and now appears in the Financial Services and Markets Bill.
The Bank of England has no shortage of fellow travellers willing to ingratiate themselves to the Britcoin agenda: it has established two committees, or Forums, to push Britcoin forward, and they are heavily populated with members of the Visa and Mastercard ecosystems and by US BigTech.
The extent of this is laid out in Lyddon Consulting’s recent paper entitled ‘CAPTURE – BigTech and Digital Payment Giants dominate the committees evaluating the replacement of physical cash with ‘Britcoin’ – a UK ‘Central Bank Digital Currency’’.[6]
In the real world crypto is toast
None of this was knocked off course by the collapses in the cryptoasset markets up to the point when the said Mr Sunak resigned as Financial Controller. Bitcoin had dropped 34% from US$47,000 to USD31,000 on a year-to-date basis.[7] Buyers of the Terra Luna coin had lost 99% of their money.[8] Stablecoins like Tether[9] and Terra USD (the stablecoin sister of Terra Luna)[10] had lost their parity with their reference asset, and NFT volumes had crashed.[11]
In fact the recent catastrophe at FTX is now embraced by the Bank as an even greater imperative for bringing about what they want to do anyway.[12] FTX is (or was) an exchange for buying and selling crypto assets and it also issued its own token called FFT. It has filed for bankruptcy, its tokens have crashed in value, and the exchange itself is now nearly valueless. The losses for investors have been estimated as high as US$8 billion.[13] Shoddy governance, poor accounting, epic value destruction, whizz kids who turn out to be incompetents: these are now recognized as the hallmarks of the crypto world.
Toast should be left to burn
The Bank’s line is the opposite of that taken in an article entitled ‘Let crypto burn’ published in the Financial Times on 17 November 2022, written by two US academics, Stephen Cecchetti (chair in international finance at Brandeis International Business School) and Kim Schoenholtz (professor emeritus at NYU’s Stern School of Business). Their key point is that ‘The overriding goal of policymakers should be to keep crypto systemically irrelevant. The best way to do this is let it implode under the pressure of its unsafe and unsound business practices…Rather than creating a new legal and regulatory framework that legitimises crypto, we should simply let it burn’.
But of course, so with Britcoin as with interest rates and Quantitative Easing, the Bank knows best and everyone else is an ill-educated amateur.
Jeremy Hunt, our new Financial Controller – powerless, like the rest of us
What is the role of Jeremy Hunt in all of this?
Para. 5.69 on p. 57 of Hunt’s Autumn Statement tasks the Government Chief Scientific Adviser and National Technology Officer (Sir Patrick Vallance) to ‘lead work to consider how the UK can better regulate emerging technologies, enabling their rapid and safe introduction’.
This translates into a weak and belated attempt to make out Hunt is a player in this game. The redoubtable Sir Patrick can be relied upon to spray his expert bromide endorsement over Britcoin, and if he doesn’t, the Bank has ample access to a Sir Roderick Something or a Baroness Sally Something Else to re-spray where Sir Patrick has left bare patches.
Hunt’s role is reduced to compiling the country’s balance sheet, cashflow and profit&loss account, and passing the results for checking to the Office for Budget Responsibility, another of the Bank’s subservient offshoots.
The meaning of the recent coup d’état
The UK’s de iure UK government has been sidelined by our de facto financial government – the Bank of England. That is the meaning of the coup d’état that was the defenestration of the Truss government. The Bank will now proceed to do precisely as it likes, which is to abolish physical cash and replace it with their UK-crypto, regardless of what anybody thinks and regardless of what disasters occur in real crypto.
All events are regurgitated as strengthening the case for Britcoin. Just like how all events are reconstrued by Nicola Sturgeon as strengthening the case for Scottish independence. That is the true face of the democratic disaster under which the Bank ejected Liz Truss and Kwasi Kwarteng and replaced them with their erstwhile Financial Controller and with someone who is now no more than a glorified bookkeeping supervisor.
[1] https://www.coindesk.com/policy/2022/11/21/uk-may-need-digital-pound-bank-of-englands-jon-cunliffe-says/ accessed on 24 November 2022
[2] https://www.gov.uk/government/news/government-sets-out-plan-to-make-uk-a-global-cryptoasset-technology-hub accessed on 12 November 2022
[3] https://news.sky.com/story/rishi-sunak-to-launch-an-nft-issued-by-the-royal-mint-to-help-make-uk-global-cryptoasset-hub-12582312 accessed on 12 November 2022
[4] https://www.bbc.co.uk/news/business-61011151 accessed on 12 November 2022
[5] A ‘stablecoin’ is the term for a cryptocurrency backed by a reference asset like a real currency, meaning its value ought to be more stable than a Wild-West crypto which is backed by fresh air, though the ‘stablecoin’ is unlikely to be as stable as simply holding the reference asset
[6] http://www.lyddonconsulting.com/capture-a-major-new-paper-on-the-committees-considering-a-uk-central-bank-digital-currency/ accessed on 12 November 2022
[7] https://www.coindesk.com/price/bitcoin/ accessed on 16 May 2022
[8] https://www.business-standard.com/article/finance/terra-luna-cryptocurrency-collapses-98-investors-lose-life-savings-122051200809_1.html accessed on 16 May 2022
[9] https://www.cnbc.com/2022/05/12/tether-usdt-stablecoin-drops-below-1-peg.html accessed on 15 May 2022
[10] https://www.cnbc.com/2022/05/11/terra-ust-stablecoin-dives-below-1-peg-luna-cryptocurrency-down-80percent.html accessed on 15 May 2022
[11] https://pitchbook.com/news/articles/nft-trading-crash-outlook-sports-gaming accessed on 16 May 2022
[12] https://fortune.com/crypto/2022/11/13/could-sam-bankman-fried-go-to-prison-for-the-ftx-disaster/ accessed on 14 November 2022
[13] https://www.nytimes.com/2022/11/11/business/ftx-bankruptcy.html accessed on 15 November 2022