UK Government Green Lights Stablecoins – Plus Loan Auction Latest
What’s in a name? One reasonable answer might be “a little comfort”. Take the UK government’s recent policy announcement on its attitude to crypto-assets. With many politicans and central bankers running scared of cryptocurrencies, the idea of a “stablecoin” – which would seek to maintain a link to another asset – is appealing.
The idea of stability is certainly comforting – though sceptics might argue that the link and any attendant stability could easily disappear in times of difficulty. Nevertheless, the recent pronouncement is a statement of intent.
“The UK government commenced a consultation on crypto-assets in early 2021. This past week, the UK government indicated its intent to acknowledge stablecoins as valid forms of payment while aiming to emerge as the world’s top crypto hub. This stands in stark contrast to the meandering approach taken by the US where the Chairman of the SEC, Gary Gensler announced this week he was asking staff to review how to get crypto firms “registered and regulated” most likely forced into a compliance regime created before the internet existed.
The UK government has provided a summary of its approach:
“Stablecoins are a form of cryptoasset which aim to maintain a stable value relative to other assets. The government has confirmed its intention to legislate to bring certain stablecoins, where used as a means of payment, into the regulatory perimeter. This document summarises feedback to the consultation, and outlines further detail regarding how the government intends to regulate certain stablecoins. The document also outlines the feedback received to the call for evidence on the investment and wholesale uses of distributed ledger technology, and sets out the government response, including further thinking on the development of the Financial Market Infrastructure Sandbox.”
The UK government believes that stablecoins have the potential to become a popular means of payments, creating efficiencies and removing existing friction. A future consultation is anticipated later this year to review the regulation of other crypto activities with the expectation that the UK will “take a leading role” in the ecosystem.
“The government will ensure sufficient flexibility is built into the UK’s regulatory framework to allow regulators to adapt rules and requirements as international work concludes, benefiting too from the agility that will be afforded to UK financial services legislation by the Future Regulatory Framework.”
Loan Auction Latest
- The 2021-22 tax year and the deadline for Individual Savings Plans closed last night at midnight. We have three loan auctions currently available on site.
All these loans can be held, up to £20,000, as Innovative Finance Individual Savings Accounts (IFISAs) for the new tax year. IFISAs are explained in more detail below. Here’s the latest from the auction room:
- Mar-Key has a credit rating of A+, a yield of 7 per cent and a term of two years. It is currently 35 per cent filled.
- HTHL Ltd has a credit rating of A+, a yield of 7 per cent and a term of one years. It is currently 25 per cent filled.
- Harris&Co has a credit rating of A, a yield of 8 per cent and a term of one year. It is currently 84 per cent filled.
- You can see detail on each by logging in and downloading the credit note.
Historical Performance And IFISA Process Guide
- Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee).
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.
- Money&Co. has been lending for over seven years and has only had two bad debts so far, representing a bad debt rate of 0.03 per cent per annum.
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:
- Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
- Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
- Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.
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.