More news reaches us of the attempts to popularise digital accounts with central banks. Central Bank Digital Currencies (CBDCs) are not cryptos, rather an electronic account with a central bank. The latest move, as reported by our friends at Finextra, is for international co-operation between central banks.
The Monetary Authority of Singapore and the Banque de France are hailing the results of a cross-border digital currency simulation that could upend the current correspondent banking model, enabling banks to conduct overseas transactions across a single shared ledger.
The experiment, supported by JPMorgan’s Onyx, simulated cross-border transactions involving multiple CBDCs (m-CBDC) on a common network between Singapore and France.
Cross border payments currently rely on correspondent bank arrangements that are subject to limited transparency on foreign exchange rates, restricted operating hours of payment infrastructures and currency settlement delays due to differences in time zones.
To address these challenges, the experiment used a common m-CBDC network, that applied automated market making and liquidity management capabilities aimed at facilitating cross border payments on a 24 x 7 real time basis.
The experiment simulated cross-border and cross-currency transactions between Singapore dollars and euros, conducted using a permissioned, privacy-enabled blockchain based on Quorum technology.
For the purposes of the trial, blockchain nodes were set up across private and public cloud infrastructures in both countries, while smart contracts automatically managed the EUR/SGD currency exchange rate in line with real-time market transactions and demands
The two central banks say the project demonstrated that the number of correspondent banking parties involved in the payment chain for cross-border transactions can be reduced. Consequently, the number of contractual arrangements, the KYC burden as well as the associated costs could be cut down.
Sopnendu Mohanty, chief fintech officer of MAS says: “Building a multi-currency shared ledger infrastructure allows participants across countries to transact with each other directly in different currencies. This m-CBDC experiment has broken new ground by decentralizing financial infrastructure, to improve liquidity management and market making services. It charts the path for scalable CBDC networks where central banks and commercial banks can work together to achieve the vision of cheaper, safer and more efficient infrastructure for cross border payments.”
While the experiment was limited to two central banks, the design of the network enables it to be scaled up to support the participation of multiple centrals banks and commercial banks located in different jurisdictions, he adds.
Historical Performance And IFISA Process Guide
That figure is the result of over £24 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.