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Britcoin (The Digital Pound) and the Future of Money  and Banking

Introduction

On 16th February 2023, ICAEW Insights published details of proposals for the creation of a digital pound[1]. A consultation will examine the assessment case for a central bank digital currency, which could have profound implications for consumers, businesses, banks and payment providers within the UK.

As the UK, and the City of London in particular, look to retain their position as global leaders in banking and finance, HM Treasury and the Bank of England (BoE) have proposed tentative plans for introducing a digital pound. The consultation[2] launched in February 2023 will explore proposals for a central bank digital currency (CBDC) for retail transactions between consumers and businesses. At present, only commercial banks hold accounts directly with the BoE.

Diagram, venn diagram Description automatically generated
Taxonomy of money, based on “Central bank cryptocurrencies” by Morten Linnemann Bech and Rodney Garratt
Attribution: Stanjourdan, CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0&gt;, via Wikimedia Commons
Page URL: https://commons.wikimedia.org/wiki/File:Money_flower.png

This file is licensed under the Creative Commons Attribution-Share Alike 4.0 International license.

Under this new public-private partnership, consumers (that’s me, you and all the people we know) would hold CBDC directly with the central Bank through third-party wallet providers[3], providing almost instantaneous settlement times for transactions, lower transaction costs, interoperability with other forms of money (such as cash and bank deposits) and the prospect of increased security and greater accessibility.

Central banks worldwide have been considering the potential use case for CBDCs for some time in response to recent technological developments within the crypto sector and the recent consumer shift to digital transaction payment methods. However, the shift in banking practices away from consumers holding money in cash form or as commercial bank deposits carries potentially seismic risks from a financial stability and monetary policy perspective. As such, the BoE is approaching these proposals with caution.

Risk Assessment and Prospects
To address some of the financial stability risks of a CBDC due to likely money flows out of commercial banks, deposit limits will be set in the order of £10-£20k. Without a limit, commercial banks might face funding constraints that could increase the cost of borrowing, raise interest rates on lending and reduce access to credit for consumers. The impact would be significant, affecting the ability of consumers and businesses to borrow and invest.

In particular, BoE has sought to address privacy concerns through a platform model; wallet providers would hold transaction information in ways similar to existing banking practices, while personal data held by the BoE would be anonymised. However, the implications for real-time settlement require further thought, as the absence of a break mechanism in the settlement process could mean that fraudulent payments and errors might be harder to stop and rectify.


Caption: “Bitcoin (BTC) Scam” by Infosec Images is licensed under CC BY 2.0.

The BoE has not yet specified the limit that might be set for corporates and businesses, which could be key in determining the extent of any deposit migration out of commercial banks.

The Treasury and BoE have expressed concern about possible risks and opportunities posed by a digital pound. One of the risks is that the widespread use of non-sterling digital money could compromise the UK’s monetary and financial sovereignty. If sterling were no longer the unit of account for a significant portion of UK retail transactions, monetary policy would affect a lower proportion of money in the UK and become less effective at achieving inflation targets.

However, the physical, as opposed to the digital, nature of cash means that it is harder to make large payments with or store large amounts of cash than digital money, which in itself acts to limit the scale of use in financial crime.

Some elements could result in positive or negative outcomes. For example, as an open economy, the UK could benefit from a digital pound that improves cross-border payments (such as cheaper or faster payments for international trade or remittances). But a digital pound, or a new form of privately-issued sterling digital money, could also change the structure of the financial system in a way that increases the UK’s exposure to foreign shocks.

A digital currency also raises the prospect of a monetary policy shake-up. Under existing commercial banking arrangements, the BOE’s bank rate is used to set short-term interest rates. By rewarding commercial banks with interest on reserves held on the central bank balance sheet, the BoE effectively sets the lower bound interest rate for lending in the economy.

If the demand for the digital pound results in lower deposits held by commercial banks, we may see a reduction in reserves held with the BoE, which could impact the transmission of monetary policy. To keep a check on demand for the digital currency (alongside deposit limits), it will not be rewarded with interest in the same way that commercial banks are on central bank reserves. Commercial banks would then be able to incentivise deposit flows through savings rates on their deposit products.

The business models of payments providers, including banks, card schemes and merchant acquirers, will need to adapt to retain market share and insulate against lost revenue. Commercial banks, in particular, currently enjoy several benefits through existing means of payment, including transaction data for credit assessments, interest-free funding, and cross-sell opportunities to other financial products.

Gavin Brown, Associate Professor in Financial Technology at The University of Liverpool, says implementing a UK CBDC has moved from ‘never‘ through to ‘if’ and now ultimately ‘when’ in just half a decade:
“For an economy led by financial services, the introduction of a CBDC represents a step-change in monetary policy that is so profound that UK policymakers dare not be left behind. For instance, the Chinese equivalent project, the digital yuan (or e-RMB), was released for live public testing in April 2021. The UK is already, therefore, at least five years behind.”

Brown says the prudent and considered approach was to be applauded. “It is better to be right than to be first.” However, the prospect of a digital pound highlights other important issues that must be addressed. They include individual cashlessness, financial inclusion, mitigating the shadow economy and tax gap, further potential CBDC deposit limit changes and Financial Conduct Authority deposit protection limits, and the potential for running multiple base rates and even CBDC expiry dates. “This recent announcement is, on balance, an important milestone in the evolution of British monetary policy and for the UK and the City of London to remain as a global leader in banking and finance,” Brown says. “Nonetheless, it is the thin end of the wedge, and it is important that we turn our attention to the many and varied underlying issues that the move to a digital pound could create.”

The Feasibility Study
The feasibility study will focus on several key areas, including:

  • The benefits of issuing a digital pound: The BoE will consider the potential benefits of a digital pound, such as increased efficiency, lower transaction costs, and improved financial inclusion for unbanked and underbanked populations.
  • The risks of issuing a digital pound: The BoE will also consider the potential dangers of a digital pound, such as the impact on financial stability, the potential for increased cyber threats and fraud, and the potential for the digital pound to displace existing forms of digital payments, which could have unintended consequences for the wider economy.
  • The technical design of a digital pound: The BoE will explore the technical design of a digital pound, including issues such as scalability, security, and privacy.
  • The legal and regulatory framework: The BoE will consider the legal and regulatory framework required for a digital pound, including issues such as consumer protection, data privacy, and anti-money laundering.
  • The international implications: The BoE will also consider the potential global consequences of a digital pound, such as its impact on cross-border payments and the potential for international cooperation and coordination.

The feasibility study is a positive step towards exploring a digital pound’s potential benefits and risks. A digital pound could offer several benefits but potential risks must be carefully considered and addressed. The feasibility study must be conducted thoroughly and transparently to ensure that any decision on a digital pound is based on a robust and evidence-based assessment of its potential advantages and risks.

Commentary
It seems as if a digital pound could potentially offer advantages such as faster and cheaper transactions, increased transparency, and better financial inclusion. However, implementing a digital pound would require a significant technological and regulatory infrastructure, as well as careful consideration of the potential risks and benefits.

The idea of a digital pound is not new. Proposals for a digital pound have been discussed in the past by various individuals and organisations in the United Kingdom. Here are some of the key individuals and organisations who have been involved in those discussions and when they took place:

  • The Bank of England: BoE has been exploring the idea of a digital pound since 2014. In March 2020, BoE announced it was exploring the possibility of creating a central bank digital currency (CBDC) in collaboration with other central banks.
  • The Treasury Select Committee: In 2018, the Treasury Select Committee launched an inquiry into digital currencies, including the potential benefits and risks of a digital pound.
  • The Royal Society of Arts: In 2019, the Royal Society of Arts (RSA) published a report calling for the creation of a digital pound as a means of improving financial inclusion and reducing the costs of financial transactions.
  • Members of Parliament: In 2021, several members of Parliament, including Rishi Sunak as well as BoE Governor Andrew Bailey, discussed the possibility of introducing a digital pound as a means of improving the efficiency of the UK’s financial system.

Despite these discussions, no concrete plans or decisions have yet been implemented to introduce a digital pound in the UK.

A digital pound could work similarly to other digital currencies, such as Bitcoin or Ethereum, but with some key differences. Rather than being decentralised, the digital pound would be issued and managed by a central authority, such as BoE, responsible for maintaining the currency’s integrity and ensuring it is widely accepted.

One way that a digital pound could work is through the use of a blockchain, which is a distributed ledger that records all transactions securely and transparently. Users would be able to access the digital pound through a digital wallet, which would be linked to their identity and would allow them to send and receive payments using the currency.

To prevent fraud and ensure the stability of the currency, BoE could implement a variety of measures, such as anti-money laundering and anti-terrorist financing regulations, as well as regular audits and security checks. In addition, the central Bank could use various monetary policy tools, such as interest rates or quantitative easing, to regulate the supply and demand of the digital pound and maintain its value.

Overall, implementing a digital pound would require careful consideration of various factors, including technological infrastructure, regulatory frameworks, and public acceptance. It is still uncertain whether the UK government will pursue this proposal and, if so, how it could be implemented in practice.

Glossary of terms related to a potential Digital Pound[4]
There are many types of digital currencies in use or proposed around the world, such as cryptocurrencies, virtual currencies, stablecoins, e-money and CBDCs. Each type has different features, benefits and risks. Here is a brief glossary for some common terms:

  • Anti-money laundering (AML) regulations: Rules and regulations that require financial institutions to detect and prevent money laundering activities.
  • Bitcoin is a cryptocurrency that was created in 2009 by an anonymous person or group using the name Satoshi Nakamoto. It is based on a peer-to-peer network that uses cryptography to secure and verify transactions. Bitcoin has a limited supply of 21 million coins that are generated through a process called mining[5].
  • Blockchain: A distributed ledger that records all transactions securely and transparently.
  • Central bank digital currency (CBDC): A digital currency issued and managed by a central bank.
  • Cryptocurrencies: Digital currencies that use cryptography or coding to secure and verify transactions. They are created using complex bits of computer code. Examples include Bitcoin, Ethereum and Dogecoin[6].
  • Decentralised exchange (DEX): An exchange that operates without a central authority or intermediary, relying on smart contracts and P2P networks to facilitate transactions directly between users. Examples include Uniswap, SushiSwap and PancakeSwap.
  • Digital currencies: Currencies issued by central banks as legal tender. They can be designed to have similar characteristics to cash (such as accessibility, anonymity and finality) or offer new features (such as programmability). They aim to improve financial inclusion, efficiency and innovation while preserving monetary sovereignty and stability. Examples include China’s e-CNY, Bahamas’ Sand Dollar and Sweden’s e-krona[7].
  • Digital pound: A digital version of the UK pound that would be issued and managed by the Bank of England.
  • Digital wallet: A software application that allows users to store and manage their digital currencies.
  • Distributed ledger:[8] A database that is shared and synchronised across multiple sites, institutions, or geographies, accessible by numerous people. It does not require a central authority or intermediary to validate transactions or maintain records. Examples of distributed ledgers include blockchain, hashgraph and DAG.
  • Distributed ledger technology (DLT): A technology that allows multiple parties to share and maintain a common database in a decentralised and secure manner.
  • Dogecoin: A cryptocurrency created in 2013 as a joke based on an internet meme featuring a Shiba Inu dog. It has a loyal fan base and is often used for tipping online content creators or supporting charitable causes.
  • E-money: Digital representation of fiat currency issued by licensed institutions (such as banks) and backed by funds held in accounts. It can be stored on prepaid cards or mobile wallets and used for online or offline payments. Examples include PayPal, Venmo (owned by PayPal since 2013) and M-Pesa[9].

word-image-3594-4
A copper and silver token representing Dogecoin, minted in 2014 by ShibeMint. Some were sold with private keys.
Attribution: James Tamim, CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0&gt;, via Wikimedia Commons
Page URL: https://commons.wikimedia.org/wiki/File:Dogecoin_ShibeMint_Physical_Coins_(cropped).jpg

This file is licensed under the Creative Commons Attribution-Share Alike 4.0 International license.

  • Ethereum: A blockchain platform that supports smart contracts, decentralised applications (DApps) and other cryptocurrencies. It has its own native cryptocurrency called Ether (ETH) that is used to pay for transactions and computational services on the network. Ethereum also allows users to create their own tokens using standards such as ERC-20 and ERC-721.
  • Exchange: A platform allowing users to buy, sell or trade different digital currencies or other assets using fiat currency (see below) or other digital currencies. Examples include Coinbase, Binance and Kraken.[10]
  • Facebook’s Diem (formerly Libra): An upcoming digital currency project initiated by Facebook and other partners such as Uber, Spotify and Shopify. It aims to create a global payment system that is accessible, low-cost and interoperable. Diem plans to launch multiple stablecoins pegged to different fiat currencies such as US$, EUR and GBP.
  • Fiat currency: A legal tender issued by a government or central bank that is not backed by any physical commodity, such as gold or silver. Examples include US$, EUR and GBP.[11]
  • Know your customer (KYC) requirements: Procedures requiring financial institutions to verify the identity of their customers to prevent fraud and money laundering.
  • Linden Dollars: Virtual currency used in Second Life, an online virtual world launched in 2003 where users can create avatars, interact with others, buy land and goods, etc. Linden Dollars can be purchased with real money or earned through activities within Second Life.
  • Mining: The process of validating transactions and creating new cryptocurrency units by solving complex mathematical problems using specialised hardware and software. Miners are rewarded with newly generated coins or transaction fees[12].
  • PancakeSwap: A DEX that runs on Binance Smart Chain (BSC), compatible with the Ethereum blockchain, but offers faster transactions and lower fees. PancakeSwap uses an Automated Market Maker (AMM) model similar to Uniswap but also provides other features such as governance token CAKE[13], lottery tickets, NFTs[14] etc.
  • Peer-to-peer (P2P) network: A network of computers that allows users to share resources and communicate with each other without the need for a central authority.
  • Second Life: An online virtual world launched in 2003 by Linden Lab, where users can create avatars, explore different environments, socialise, participate in events, etc. Second Life has its own economy based on Linden Dollars, which can be used for various purposes within the virtual world.
  • Smart contract: A self-executing contract programmed to execute when certain conditions are met automatically.
  • Stablecoins: Digital currencies that are pegged to another asset, such as fiat currency (e.g., US dollar) or gold, to reduce volatility. They aim to combine the advantages of cryptocurrencies (such as speed, low cost and transparency) with the stability of traditional money. Examples include Tether, US$ Coin and Facebook’s Diem[15].
  • SushiSwap: Another DEX that runs on the Ethereum blockchain. It forked from Uniswap in 2020 with some additional features such as governance token SUSHI, revenue sharing for liquidity providers, integration with other platforms such as BentoBox and Kashi Lending etc.
  • Tether: A stablecoin that claims to be backed by US dollars or other fiat currencies at a 1:1 ratio. It aims to provide stability and liquidity in the volatile cryptocurrency market. However, Tether has faced controversy over its lack of transparency and audits regarding its reserves.[16]
  • Token: A digital representation of an asset or a unit of value that can be transferred, stored or exchanged on a blockchain or other DLT platform. Examples include Bitcoin, Ether and NFTs[17].
  • Uniswap: A decentralised exchange (DEX) that runs on the Ethereum blockchain. It allows users to swap any ERC-20 token without intermediaries, order books or fees. Uniswap uses an automated market maker (AMM) model that relies on liquidity pools provided by users who earn fees from each trade[18].
  • USD Coin (USDC): Another stablecoin pegged to the US dollar at a 1:1 ratio. It is issued by Circle, a fintech company and Coinbase, a cryptocurrency exchange. Unlike Tether, USDC claims to be fully backed by audited reserves held in regulated financial institutions.
  • Virtual currencies: Digital currencies that are unregulated and created by developers or algorithms following a clear set of rules. They are usually specific to a certain online platform or community. Examples include Linden Dollars (used in Second Life) and World of Warcraft Gold (see below).
  • Wallet address: A unique identifier that consists of a string of alphanumeric characters that represents the destination or source of a digital currency transaction. It is similar to an email address or a bank account number.
  • World of Warcraft Gold (WoW Gold): The virtual currency used in World of Warcraft (WoW), an online role-playing game developed by Blizzard Entertainment. WoW Gold can be earned through quests, looting enemies, selling items etc., or bought with real money from third-party platforms. WoW Gold can be used for various purposes within WoW, such as buying equipment, mounts, pets etc.

These terms are not exhaustive, and other concepts and terminology may be related to a potential digital pound that could arise in the future.

What are other Countries Doing?
Some countries have already launched or are in the process of developing digital currencies:

  • China: The People’s Bank of China has been developing its own digital currency, called the Digital Currency Electronic Payment (DCEP), since 2014. It is currently being tested in several cities across China and is expected to be rolled out nationwide soon.
  • Sweden: The Riksbank, Sweden’s central bank, has been exploring the idea of an e-krona since 2017. A pilot program is scheduled to begin in 2023.
  • The Bahamas: The Central Bank of The Bahamas launched its digital currency, called the Sand Dollar, in October 2020. It is currently the world’s only official digital currency issued by a central bank that is in use.
  • The Eastern Caribbean Currency Union: The Eastern Caribbean Central Bank launched its digital currency, called DCash, in March 2021. It is currently being used in several countries in the region.
  • The European Union: The European Central Bank has been exploring the idea of a digital euro since 2020 but, so far as is known, has made no decision yet on whether or when it may be launched.

These are just a few examples, as many other countries are also exploring the possibility of launching their own digital currencies in the future.


Caption: “Bitcoin on a motherboard” by wuestenigel is licensed under CC BY 2.0.

The Bank of England’s Explanation
“The digital pound would be a new type of money issued by the Bank of England for everyone to use for day-to-day spending. You would be able to use it in-store or online to make payments. This type of money is known as a central bank digital currency (CBDC). You may also hear it being called ‘digital sterling’ or even ‘Britcoin’. We call the UK version of CBDC the digital pound. The digital pound would be denominated in sterling and its value would be stable, just like banknotes. £10 in digital pounds would always have the same value as a £10 banknote. If we introduced it, it would not replace cash. We know being able to use cash is important for many people. That’s why we will continue to issue it for as long as people want to keep using it. The digital pound would not be a cryptocurrency or cryptoasset. As opposed to cryptocurrencies, which are issued privately, the digital pound would be issued by the Bank of England and be backed by the Government.”[19]

Closing Words
The British government has not yet made any official proposals for a digital pound. However, the Bank of England (BoE) has recently announced that it will conduct a feasibility study into the potential benefits, risks, and practicalities of issuing a central bank digital currency (CBDC), which would be a digital version of the UK’s national currency, the pound sterling. The feasibility study will focus on several key areas, including:

  • The benefits of issuing a digital pound: The BoE will consider the potential benefits of a digital pound, such as increased efficiency, lower transaction costs, and improved financial inclusion for unbanked and underbanked populations.
  • The risks of issuing a digital pound: The BoE will also consider the potential dangers of a digital pound, such as the impact on financial stability, the potential for increased cyber threats and fraud, and the potential for the digital pound to displace existing forms of digital payments, which could have unintended consequences for the wider economy.
  • The technical design of a digital pound: The BoE will explore the technical design of a digital pound, including issues such as scalability, security, and privacy.
  • The legal and regulatory framework: The BoE will consider the legal and regulatory framework required for a digital pound, including issues such as consumer protection, data privacy, and anti-money laundering.
  • The international implications: The BoE will also consider the potential international implications of a digital pound, such as its impact on cross-border payments and the potential for international cooperation and coordination.

In terms of analysis, the feasibility study is a positive step towards exploring the potential benefits and risks of a digital pound. A digital pound could offer several benefits, such as faster and cheaper cross-border transactions, improved financial inclusion, and enhanced security and privacy. However, there are also potential risks and challenges associated with CBDCs, and these will need to be carefully considered and addressed.

The feasibility study will provide valuable insights into the potential of a digital pound and will help formulate future decisions by the BoE and the British government. It is important that the feasibility study is conducted thoroughly and transparently to ensure that any decision on a digital pound is based on a robust and evidence-based assessment of its potential benefits and risks.

Is a Britcoin digital currency an accident waiting to happen?

Interesting to note is an article dated 6th April 2023 by Peter Young at https://capx.co/a-britcoin-digital-currency-is-an-accident-waiting-to-happen/

The article argues against creating a CBDC in Britain, stating that there is no current need, nor is there ever likely to be. It claims that CBDCs introduced in other countries have been unsuccessful and threaten privacy, security, and government control. The article suggests CBDCs are a solution in search of a problem and that the BoE should focus on its core tasks instead of introducing a dangerous and unnecessary scheme. It cites former BoE Governor Lord King as having pointed out that:
‘CBDCs are about ways of making payments; they are not a new currency. Whether a country needs a CBDC is really about the state of its current payments system.’

A person wearing glasses and a suit Description automatically generated with medium confidence
Caption: Official portrait of Lord King of Lothbury 3×4 portrait of Lord King of Lothbury [Mervyn King]
Attribution: Roger Harris, CC BY 3.0 <https://creativecommons.org/licenses/by/3.0&gt;, via Wikimedia Commons
Page URL: https://commons.wikimedia.org/wiki/File:Official_portrait_of_Lord_King_of_Lothbury_crop_2.jpg

Sources and Further Reading

­­­­Books:

CAUTION: This paper is compiled from the sources stated but has not been externally reviewed. Parts of this paper include information provided via artificial intelligence which, although checked by the author, is not always accurate or reliable. Neither we nor any third parties provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or suitability of the information and materials covered in this paper for any particular purpose. Such information and materials may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. Your use of any information or materials on this website is entirely at your own risk, for which we shall not be liable. It shall be your own responsibility to ensure that any products, services or information available through this paper meet your specific requirements and you should neither take action nor exercise inaction without taking appropriate professional advice. The hyperlinks were current at the date of publication.

End Notes and Explanations
  1. At: https://www.icaew.com/insights/viewpoints-on-the-news/2023/feb-2023/treasury-and-bank-of-england-release-digital-pound-proposals ↑
  2. At: https://www.bankofengland.co.uk/paper/2023/the-digital-pound-consultation-paper ↑
  3. Explanation: A Wallet Provider is a software or web service that allows users to store and control their online shopping information, such as logins, passwords, shipping address and credit card details. It also provides a method for consumers to purchase products from online retailers. A provider uses an electronic device, online service, or software program allowing one party to make electronic transactions with another party bartering digital currency units for goods and services. This can include purchasing items either online or at the point of sale in a brick-and-mortar store, using either mobile payment (on a smartphone or other mobile device) or (for online buying only) using a laptop or other personal computer. Money can be deposited in the digital wallet prior to any transactions or, in other cases, an individual’s bank account can be linked to the digital wallet. Users might also have their driver’s license, health card, loyalty card(s) and other ID documents stored within the wallet. The credentials can be passed to a merchant’s terminal wirelessly via near-field communication (NFC). Increasingly, digital wallets are being made not just for basic financial transactions but to also authenticate the holder’s credentials. Source: https://en.wikipedia.org/wiki/Digital_wallet ↑
  4. Largely sourced by the author’s interrogation of machine-generated artificial intelligence at: bing.com [chat] and https://chat.openai.com ↑
  5. Source: https://www.investopedia.com/terms/d/distributed-ledgers.asp ↑
  6. Source: https://www.skillsyouneed.com/general/digital-crypto-currency.html ↑
  7. Source: https://www.schroders.com/en-us/us/intermediary/insights/our-glossary-of-digital-assets/ ↑
  8. Source: A distributed ledger (also called a shared ledger or distributed ledger technology or DLT) is the consensus of replicated, shared, and synchronised digital data that is geographically spread (distributed) across many sites, countries, or institutions. In contrast to a centralised database, a distributed ledger does not require a central administrator, and, consequently does not have a single (central) point-of-failure. In general, a distributed ledger requires a peer-to-peer (P2P) computer network and consensus algorithms so that the ledger is reliably replicated across distributed computer nodes (servers, clients, etc.). The most common form of distributed ledger technology is the blockchain (commonly associated with the Bitcoin cryptocurrency), which can either be on a public or private network. Infrastructure for data management is a common barrier to implementing DLT. Source: https://en.wikipedia.org/wiki/Distributed_ledger ↑
  9. Source: https://marketbusinessnews.com/financial-glossary/digital-currency/ ↑
  10. See: https://www.finder.com/cryptocurrency-glossary ↑
  11. See: https://www.investopedia.com/terms/d/digital-currency.asp ↑
  12. Source: https://www.finder.com/cryptocurrency-glossary ↑
  13. Explanation: CAKE is the governance token of the PancakeSwap decentralized exchange on the Binance Smart Chain. Holders of CAKE tokens can participate in the decision-making process for the development and governance of the PancakeSwap platform, such as voting on proposals for changes to the platform, protocol fees, and allocation of community funds. In addition, CAKE tokens are used for staking, liquidity provision, and earning rewards on the PancakeSwap platform. ↑
  14. Explanation: NFTs (non-fungible tokens), are unique digital assets that are verified on a blockchain. Unlike fungible tokens such as Bitcoin or Ether, which are interchangeable and have the same value, each NFT is one-of-a-kind and has its own unique value and properties. NFTs can represent a wide range of digital assets, such as artwork, music, videos, tweets, and more. They are used to prove ownership and authenticity of the digital asset they represent, allowing creators to monetize their work and collectors to own a piece of digital history. The ownership of an NFT is recorded on a blockchain, which serves as a public ledger that verifies the authenticity and ownership of the asset. This allows for the creation of a digital marketplace for NFTs, where buyers can purchase and sell these unique digital assets. NOTE: Fungibility refers to the property of an item or asset that can be easily exchanged or substituted for another item or asset of the same type and value. Fungible assets are indistinguishable from one another, and so can be freely interchanged without affecting their value. This makes fungibility an important concept in economics and finance, as it allows for efficient trade and exchange of goods. Examples of fungible assets include currencies, commodities, and financial instruments such as stocks and bonds. ↑
  15. See: https://www.finder.com/cryptocurrency-glossary ↑
  16. Explanation: Tether (often referred to by its currency codes, USD₮ and USDT, among others) is an asset-backed cryptocurrency stablecoin. It was launched by the company Tether Limited Inc. in 2014. Tether Limited is owned by the Hong Kong-based company iFinex Inc., which also owns the Bitfinex cryptocurrency exchange. As of July 2022, Tether Limited has minted the USDT stablecoin on ten protocols and blockchains. Tether is described as a stablecoin because it was originally designed to be valued at USD $1.00. Tether Limited has stated that it maintains USD $1 of asset reserves for each USD₮ 1 issued, but has been fined by regulators for failing to do this and has failed to present audits showing sufficient asset reserves. Cited at: https://en.wikipedia.org/wiki/Tether_(cryptocurrency) ↑
  17. See: https://www.finder.com/cryptocurrency-glossary ↑
  18. Explanation: Uniswap is a decentralized cryptocurrency exchange that uses a set of smart contracts (liquidity pools) to execute trades on its exchange. It’s an open-source project and falls into the category of a DeFi product (Decentralized finance) because it uses smart contracts to facilitate trades. The protocol facilitates automated transactions between cryptocurrency tokens on the Ethereum blockchain through the use of smart contracts. As of October 2020, Uniswap was estimated to be the largest decentralized exchange and the fourth-largest cryptocurrency exchange overall by daily trading volume. Cited at: https://en.wikipedia.org/wiki/Uniswap ↑
  19. Source: https://www.bankofengland.co.uk/the-digital-pound ↑

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Martin Pollins

Martin Pollins is a Chartered Accountant and MBA with wide experience in corporate finance and business management. He has served on the boards of several companies, including those listed on the London Stock Exchange, AIM and OFEX. He is the Chairman and Founder of OneSmartPlace and was a Council member of the Institute of Chartered Accountants in England and Wales from 1988 to 1996. He was managing partner of PRB Martin Pollins, based in Sussex, the first Accountancy firm to advertise on British television. He went on to create and launch the CharterGroup Partnership (the UK’s first Accountancy network) and then LawGroup UK (at the time, one of the largest networks of lawyers in the UK). In recent years, he helped to raise several £millions to fund British films such as The Da Vinci Code, Bridge of San Luis Rey, Head in the Clouds and Merchant of Venice with actors such as Charlize Theron, Robert De Niro, Al Pacino, F. Murray Abraham. Kathy Bates, Gabriel Byrne, Geraldine Chaplin, Tom Hanks, Ian McKellen, Audrey Tautou, Penélope Cruz, Steven Berkoff, Lynn Collins, Jeremy Irons, Joseph Fiennes and many more. He has written several business publications (see https://onesmartplace.com/resources/)

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