The Bank of England, German Lessons and Token Disruption

Dateline: New York, 23rd July 2024.Speaking at the Swiss National Bank’s “Towards the future of the monetary system” event earlier this year, Bank of England Deputy Governor Sarah Breeden predicted two distinct waves of benefits arriving because of tokenisation. First, she said that in the near future she expects to see efficiencies that “broadly preserve the current structure of payment and settlement” but in the longer term, she sees it as more disruptive with post-trade processes collapsing and layers of intermediaries being flattened. Not that it matters what I think, but I think she is spot on.ShareNorth and SouthMs. Breeden’s perspective is important because while the Bank of England, in common with many other central banks, is experimenting with wholesale central bank digital currency (CBDC) of one form and another, the Old Lady of Threadneedle Street adopted a particularly innovative approach by creating a new category of central bank account (the “omnibus” account) for institutions. As I wrote in Forbes recently, the introduction of the omnibus account led directly to the creation of Fnality, a private institutional form of tokenized money supported by a great many institutions. Insititutions transfer Sterling from their accounts to the omnibus account and in return obtain Sterling Tokens that can be used in on-chain transactions.© Helen Holmes (2024).The importance of this innovation should not be understated. Andrew Griffith (then the Economic Secretary of the UK Treasury) said last year that a wholesale private sector stablecoin (such as Fnality, for example) would precede a wholesale CBDC (which he…The Bank of England, German Lessons and Token Disruption