JustUs founder Lee Birkett said proposals for a digital currency issued by the Bank of England could be a “turning point” for the peer-to-peer lending sector.
In the House of Commons, Chancellor Rishi Sunak said he welcomed work by the Bank of England and the Treasury to consider whether and how central banks can issue their own digital currencies as a complement to cash.
He said that the government will publish a consultation shortly to make new forms of privately issued currencies – known as stablecoins – meet the same high standards expected from other payment methods.
Peer-to-peer lending platform boss Birkett welcomed these ideas and other elements of Sunak’s speech, in which the chancellor said the government will “use technology to deliver better outcomes for consumers and businesses”.
Non-bank lenders have been denied access to the term funding scheme, which gives banks cheap funding from the Bank of England. Therefore, a central bank-issued digital currency would benefit P2P platforms, allowing them to lend alongside the crowd to small businesses and consumers, Birkett said.
There could also be other benefits for JustUs, he added.
His platform has launched its Small Business Interruption Loan Service (SBILS), which is aimed at providing funding for businesses that missed out on finance under the coronavirus business interruption loan scheme. Birkett said the platform could lend a Bank of England-issued stablecoin via the scheme.
JustUs is also looking to offer owner-occupied residential mortgages to peer-to-peer investors, following a change in the rules. Once it has been granted the required exemption from the government, Birkett said the platform could fund its People’s Mortgage with these stablecoins, alongside the crowd, to help mortgage prisoners.
Birkett said that the currency could also be transferred into JustUs’ own currency, BiPS, which is used on its sister platform, the Moneybrain app.
“This is a turning point for P2P,” said Birkett.
“This is P2P redefined with cryptocurrency at the heart and central banks of the world accepting it and putting it into action.
“Central bank digital currency is a viable solution which cuts out the banks and is what P2P is all about, providing a better deal for all savers and borrowers.
“It will benefit P2P, crowdfunding, SBILS and offering P2P mortgages as well as giving people savings again.
“We’ve been pushing to get direct money from the Bank of England. We could lend this digital money to mortgage prisoners and to borrowers through SBILS.
“It can go alongside the crowd or directly, the options are endless, there’s no balance sheet risk with the bank and its direct and true P2P. It would benefit the whole sector because it makes digital money around the world appealing so people will want to own it.”
Birkett said banks would have to pivot to other types of activities to survive because banking in its current form would cease to exist.
“In my mind digital currency is the more efficient method of delivery and more cost effective,” he said.
“Banks need about five, six per cent to cover overheads while we need about one.”