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Last night’s landslide victory of the UK’s Labour Party in the general election saw little to no mention of Bitcoin, blockchain, or digital assets.
Leading up to the election, the party’s manifesto remained silent on crypto or Bitcoin at a time when the topic is becoming increasingly prevalent in the US election race. However, Labour’s previous statements and plans suggest a cautious yet open stance toward blockchain technology. While not directly addressing crypto, Labour has shown interest in related technologies, such as the support for the tokenization of assets.
Shadow Chancellor Rachel Reeves and Shadow City Minister Tulip Siddiq have shown openness to the tech sector. Siddiq, in particular, has stated that if Labour is victorious, it would aim to transform the UK into a global center for tokenized assets.
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Labour’s financial services plan, “Financing Growth,” acknowledges the growing case for a state-backed digital pound and emphasizes the need for “financial products to reach underserved communities.”
“Embrace innovation and fintech as the future of financial services by becoming a global standard-setter for the use of AI in FS, delivering the next phase of Open Banking, defining a roadmap for Open Finance, embracing securities tokenisation and a central bank digital currency, and establishing a regulatory sandbox for financial products to reach underserved communities.”
The party has fully supported the Bank of England’s ongoing work in this area, indicating a commitment to continue exploring and developing a CBDC.
However, Labour’s approach appears measured and potentially unique from other planned implementations. They have highlighted the importance of addressing key concerns such as privacy, financial inclusion, and stability in designing any potential CBDC. This potentially more balanced perspective suggests that Labour is not rushing headlong into digital currency implementation but instead taking a considered approach that prioritizes public interest and economic stability.
Labour’s plan also emphasizes the importance of making the UK a global hub for securities tokenization. This focus on exploring the tokenization of securities indicates a forward-thinking approach to financial services that could enhance the UK’s position as a fintech leader.
The party has expressed intentions to advance open banking initiatives, explore the potential of open finance, and establish regulatory sandboxes to test financial products aimed at underserved communities. These initiatives, alongside CBDC development, could contribute to a more inclusive and technologically advanced financial ecosystem in the UK.
Healthy skepticism for CBDCs
As with any attempt to deliver a CBDC, it’s important to remain skeptical due to its potential for governmental overreach and abuse. However, as one of the few ‘Left Wing’ governments to oversee a CBDC, Labour could offer a unique take on its design, especially given ongoing debates within the party on Universal Basic Income and its focus on ordinary working people.
Labour’s support for CBDC exploration does not equate to an immediate implementation plan. The party has emphasized the need for thorough consultation and careful consideration of potential impacts. This cautious approach could help mitigate risks associated with CBDCs, such as privacy concerns and possible disruptions to the existing financial system.
I’ve not been personally optimistic that a CBDC can be designed to offer benefits to ordinary people, but maybe there is a chance with Labour. It is clear that FIAT, in its current form, is failing. A move toward a system that creates more transparency over government spending, more accessible access to finance for the unbanked, cheaper and faster international transfers, reduced costs of Central Bank printing, increased privacy, and a reduction in financial crime would be a positive step.
However, designing a CBDC to offer all these things without the more Orwellian alternatives may require too much of a leap of faith for most. A party with socialist origins, with a forward-thinking and modern technology focus, in the 2024 United Kingdom could theoretically adopt the best of what blockchain offers without overreaching if appropriately advised by those in the digital assets industry.
For me, this would mean adopting Bitcoin as a reserve asset, using ZK technology to design a CBDC, and creating immutable smart contracts on a public ledger. We would have one shot at this, and it would have to be designed so that a future government could not alter it to take advantage of its citizens. Perhaps I’m too much of a dreamer, but I believe blockchain can be a core part of government; we just have to do it right.
The coming months and years will be critical in determining whether the UK under Labour leadership can successfully navigate the complex landscape of digital currencies, balancing innovation with stability and public interest. If successful, the UK could emerge as a global leader in the responsible development and implementation of CBDCs, setting a precedent for other nations to follow.