As we reported earlier this month, the nature of money is changing. Travellers’ cheques are already ancient history, cash is on the way out – and the way monetary systems are organised seem highly likely to be next.
And here is the latest, from our friends at Finextra. We tend to agree with the anonymous central bank official:
As news leaks out about a possible 2021 launch for Facebook’s digital currency Libra, a senior European Central Bank official warns: “What is at stake is nothing short of the future of money”.
Facebook’s Libra cryptocurrency is readying to launch as early as January, the Financial Times reported on Friday, citing three unidentified people involved in the project.
The Geneva-based Libra Association that will issue and govern Libra plans to launch a single digital coin backed by the dollar, a significant scaling back from its recently revised plans to to issue a series of stablecoins backed by individual traditional currencies, as well as a token based on the currency-pegged stablecoins.
The news has alarmed central banks, which are currently at a minimum of two years out from creating their own digital alternatives.
ECB board member Fabio Panetta, speaking today at a Bundesbank-convened future of payments conference, argues that the impending revolution in payments “requires us to stand ready to reinvent sovereign money”.
Speaking directly to Facebook’s stablecoin strategy, Panetta warns: “Stablecoin users are likely to bear higher credit, market and liquidity risks, and the stablecoins themselves are vulnerable to runs, with potentially systemic implications.”
He says the risks could be mitigated if the stablecoin issuer were able to invest its reserve assets in the form of risk-free deposits at the central bank, as this would eliminate the investment risks that ultimately fall on the shoulders of stablecoin holders.
“This would not be acceptable, however, as it would be tantamount to outsourcing the provision of central bank money,” Panetta states. “It could endanger monetary sovereignty if, as a result, private money – the stablecoin – were to largely displace sovereign money as a means of payment. Money would then be reduced to a ‘club good’ offered in return for the payment of a fee or membership of a platform.”
The ECB is mustering support for the creation of a a digital euro, with multiple experiments underway across EU markets and around the world.
In Europe, the ECB and the national central banks have started preliminary experimentation through four work streams.
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.