Regular readers will be aware of this item, a regular in our News section. There’s a very strange kind of beauty contest going on amongst the world’s central bankers. The competition is on to produce a widely accepted digital currency. A central bank digital currency (CBDC) will not of course be a true cryptocurrency, as the central bankers will have a register that reflects the financial topography of the currencies – there will be no independent, shared-ledger algorithm.
The debate over the value of CBDCs continues to simmer, with central bankers on either side of the pond weighing in with very different opinions.
More than half of the world’s central banks are actively exploring CBDCs, while some, most notably China’s, are well on the way to a full launch.
In a speech this week, Bank of England Deputy Governor Jon Cunliffe gave one of the strongest hints yet that the UK is on its way towards some form of Britcoin.
“We may not be there yet, but it looks probable in this country that if we want to retain public money capable of general use, and available to all citizens, the state will need to issue, public digital money,” Cunliffe told his audience.
In contrast, Boston Federal Reserve president Eric Rosengren has offered up his own, less enthusiastic, views on the subject of a digital dollar.
“It is important to understand what problems a central bank digital currency is being designed to solve, and whether other technologies could more cheaply or efficiently address those problems,” said Rosengren at a virtual event this week.
Rosengren highlighted familiar potential upsides to CBDCs, including more financial inclusion and cheaper cross-border payments, but also stressed the risks to financial stability.
Despite the misgivings, Rosengren’s Boston Fed is working with the Massachusetts Institute of Technology to develop a “hypothetical” digital currency platform.
Meanwhile in the UK, the Bank of England and UK Treasury recently launched a fintech taskforce to coordinate exploratory work on a potential CBDC.
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 2020/21 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.