1. ‘Scale box’ and CFIT
The ‘scale box’ is a permanent digital sandbox pilot which supports partnerships between incumbent financial services firms and FinTechs / RegTechs to provide support for growing regulated firms.
The Chancellor has announced the launch of the ‘scale box’ along with the Second Phase of its Digital Sandbox which creates a sandbox for firms to test new products which tackle sustainability and climate change related challenges.
The CFIT is an industry-led organisation which co-ordinates and fosters growth of the FinTech market by providing a variety of services and creating a collaborative environment. We have provided a detailed explanation of its proposed role in our previous article (available here). The CFIT is also the body which implements or oversees a number of other recommendations which were set out in the Kalifa Review, such as working closely with newly formed regional hubs to help address their challenges.
The ‘scale box’ and CFIT were both ideas recommended in the recent Kalifa Review (see our article on the topic available here). Whilst we await the government’s full response to the Kalifa Review which has not yet been published, the implementation of these two recommendations indicates that the government is likely to have a positive view of the review.
2. CBDCs, a new sandbox, and a BoE “omnibus” account
A CBDC is an electronic form of central bank money which, in these circumstances, could be used more widely by households and businesses to carry out payment transactions and store value – effectively acting as a digital version of a traditional bank note.
The Bank of England published its Discussion Paper on a Central Bank Digital Currency on 12 March 2020 (see our article on the topic available here) which set out a potential path for the creation of a CBDC in the UK.
Whilst the government and Bank of England (“BoE”) have made clear that they have not yet made a decision on whether to introduce a CBDC in the UK, the Chancellor’s announcement (reiterated by the BoE) of a new “Taskforce” indicates the possibility of its introduction has become more likely.
The Taskforce will be set up to ensure a strategic approach to CBDCs and promote close coordination between UK authorities as they explore CBDCs. It will be co-chaired by the Deputy Governor of the Bank of England, Jon Cunliffe, and HM Treasury’s (“HMT”) Director General of Financial Services, Katherine Braddick, and will consist of members of both the BoE and HMT.
The Taskforce will have the following four functions:
- Coordinate exploration of the objectives, use cases, opportunities and risks of a potential UK CBDC – this involves agreeing the principal reasons for issuance, agreeing long-term strategic objectives, supporting the assessment of the balance of risk and benefits, and ensuring a joined up contribution of these issues across UK authorities;
- Guide evaluation of the design features a CBDC must display to achieve the Taskforce’s goals – this involves supporting clear “requirements” for CBDCs, informing research into its benefits, and guiding the identification and resolution of any “trade-offs” with respect to its features;
- Support a rigorous, coherent and comprehensive assessment of the overall case for a UK CBDC – this involves guiding the development of frameworks for assessing costs and benefits, supporting the assessment of the overall case for CBDCs, and informing engagement with stakeholders; and
- Monitor international CBDC developments to ensure the UK Remains at the forefront of global innovation – this involves input to the UK’s international work on CBDCs to shape outcomes.
In addition to the Taskforce, the Chancellor and BoE also announced the creation of a CBDC Engagement Forum and CBDC Technology Forum, which shall operate as follows:
- CBDC Engagement Forum – this is jointly chaired by the BoE and HMT to engage senior stakeholders and gather strategic input on all non-technology aspects of the CBDC, in particular, helping the BoE and HMT to understand the practical challenges of designing, implementing and operating a CBDC; and
- CBDC Technology Forum – this will engage stakeholders and gather input on all technology aspects on CBDC and its role will be to help the BoE to understand the technological challenges of designing, implementing and operating a CBDC.
The BoE has also announced it will establish a CBDC, which is a division of the BoE to lead on internal exploration around its CBDC and lead the BoE’s external engagement on CBDC.
The Chancellor also announced a new sandbox for firms using distributed ledger technology to improve financial market infrastructure, which will be implemented jointly by HMT, the BoE, and the FCA.
In addition, the Chancellor also announced the BoE’s new “omnibus” account (for details, see Access Policy), creating a new type of account available in its current Real-Time Gross Settlement system, which can allow the operator of a payment system fully to fund settlements on their platform with central bank money, allowing them to offer innovative payment services with the security of central bank settlement.
3. Reforms to prospectus rules and listings
The Chancellor explained how the government would take forward some of the recommendations in the recent UK Listing Review by Lord Hill.
The Chancellor has made announcements in relation to three recommendations in particular:
- The prospectus regime – the UK will consult on changes to its prospectus regime to ensure the rules are not overly burdensome;
- Forward-looking financial information – looking for how to make it easier for companies to provide forward-looking financial information for investors, which aims to benefit companies with growth potential such as technology and life sciences companies; and
- Improving the efficiency of rights issues – a group of experts shall be convened to look at improving the efficiency of rights issue when a listed company invites existing shareholders to purchase new additional shares, including exploring the role of technology to streamline the process.
Co-authored by Alexander Parkin
Part 1 │ Part 2