As promised, more from the changing digital asset landscape. Tokens – the big “new” thing for 2021– and central bank digital currencies are leading the mainstream’s charge to catch up.
As part of an experimental programme led by the Banque de France, more than ten transactions on fund units, for a total amount of more than €2 million, were carried out in December 2020 on a blockchain-based mutual funds platform from IZNES using central bank digital currency (CBDC).
The pilot, conducted in collaboration with SETL, Citi, CACEIS, Groupama AM, OFI AM and DXC, marks the first settlement of fund units using CBDC.
The initiative is one of a number of different experiments underway at the Banque de France on potential applications for a central bank digital currency in interbank settlements.
For this project, SETL provided the DLT technology as well as the technology behind the issuance and redemption of CBDC tokens, in liaison with the technology team of the Banque de France and IZNES. DXC supervised the security issues.
Citi and CACEIS acted as commercial banks to use CBDC tokens created by the Banque de France. CACEIS also acted as custodian of the “Groupama Entreprises” fund. Groupama AM acted as fund manager, while OFI AM and SETL acted as proprietary investors.
Elsewhere in Europe, Zürcher Kantonalbank (ZKB) and Deutsche Börse’s post-trade services provider Clearstream successfully processed their first live blockchain-based end-to-end fund transactions, using FundsDLT, a decentralised platform for fund transaction processing. The project, which entailed an end investor placing a fund transaction request via a mobile app directly on the private blockchain, reduced the overall processing time from the placing of the order to confirmation from several hours to only a few minutes.
Historical Performance And IFISA Process Guide
That figure is the result of over £20 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.