Philip Hammond on CBDCs, stablecoins and crypto in global finance

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Watch: Philip Hammond on CBDCs, stablecoins and crypto’s place in global finance | The Crypto Mile

Former UK Chancellor Philip Hammond said the crypto market is here to stay, adding that the sector is being “colonized by institutions as banks invest globally in developing their own digital capabilities.”

On this week’s episode of Yahoo Finance UK’s The Crypto Mile, Hammond spoke about CBDCs, stablecoins and the place of crypto in global finance.

He said: “The crypto market is here to stay, and it’s not really for regulators or others to say that this asset or that asset has no value, an asset has value if someone is willing to pay for it.

“But, if there’s a market to be created, it needs to be properly regulated, and I’m pretty comfortable with an institutional market for cryptocurrency assets.”

Copper and digital asset custody

During his tenure as UK finance minister, Hammond was often characterized as a conservative who focused on fiscal discipline rather than innovation.

He has now ventured into cryptocurrencies, web3 innovations and digital asset infrastructure.

In 2021, he became a senior adviser at Copper, a London-based crypto custodial firm, becoming the company’s chairman in 2023.

Read more: Live crypto prices

Despite market fluctuations, Copper has become a leading provider of institutional digital asset custody and trading solutions.

Hammond said he believes that in the future, the digital asset class will expand to encompass the token forms of many traditional financial assets.

Tokenization of all financial assets

Financial asset tokenization is the process of converting the ownership and rights associated with a traditional financial asset, such as stocks, bonds, real estate, or even art, into digital tokens that can be traded and managed on blockchain platforms.

Hammond said Copper’s underlying goal is to “develop the core technology, so that as the market for digital assets expands from simple crypto assets to tokenized forms of broader financial assets” .

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Proponents expect the tokenization of financial assets to grow in popularity as the adoption of blockchain technology continues to grow.

Read more: Philip Hammond: The shift from big finance to crypto is unstoppable

This could lead to increased liquidity through fractional ownership, improved efficiency with 24/7 instant trading, lower costs by eliminating middlemen, enhanced security using blockchains and global access for investors without geographic restrictions.

“Everyone recognizes that blockchain has the potential to have big benefits for markets,” Hammond told Yahoo Finance UK.

“If we are right and this is the start of a process of digitalization across financial services, the blockchain infrastructure that underpins it will become part of the systemically important rails of the financial services industry. .”

Crypto-assets, a systemic risk for global finance?

The Bank for International Settlements (BIS) has previously stated that crypto assets could pose a systemic risk to global finance if their rapid growth were to lead to intuitive finance’s significant exposure to high volatility and the potential for misuse of assets. cryptographic.

In February, the head of the BIS, Agustn Carstens, told Bloomberg: A few years ago, crypto-assets and cryptocurrencies gave us something of an alternative to fiat money.

“I think the battle has been won; technology doesn’t make trust money. The most important thing is that these activities don’t have a systemic impact.

“If we have more events like FTX, it could at some point become a systemic impact.”

However, Hammond suggested that crypto, in its current form, poses no systemic risk to global finance.

Read more: Gucci teams up with Bored Ape’s Yuga Labs to bring luxury fashion to the metaverse

“Cryptocurrencies are not a risk because, simply by their magnitude, they are not yet at risk of becoming a systemic risk to the system,” he said.

“But it is something that central banks around the world are watching and will be very aware of if the value of crypto assets on balance sheets reaches the level where they could become a systemic risk.

“So this will call for an acceleration of the process of regulation and management of these markets.”

CBDC Global Developments and Stable Coins

Central banks around the world are researching and developing central bank digital currencies (CBDCs).

CBDCs aim to harness the benefits of digital currencies, such as improved efficiency and financial inclusion, while maintaining the stability and oversight provided by central bank authority.

Hammond said there is a need for CBDCs “if we want to expand beyond the current range of crypto assets and into digitized markets for traditional assets through tokenization, then we need a new means of payment in fiat”.

“It could be done with stablecoins, but stablecoins, because they’re issued by non-sovereigns, introduce another level of risk,” he said.

“As soon as you introduce a non-sovereign into the equation, you create more risk, so we would like to see CBDCs become available as a way to enable digital settlements in these emerging digital markets.

“Eventually, market players would choose CBDCs over stablecoins because the governments that issue CDBCs are trusted by users.”

Watch: Polygon will ‘surpass Ethereum in economic activity,’ says co-founder | The Crypto Mile

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