Could your wages soon be paid in crypto? That just got a big step closer

Salary payments in crypto moved a step closer this week. A partnership was announced between AllUnity, a regulated e-money operator, and Zebec, a specialist in developing networks for payroll payments using stablecoins.

Stablecoins are a form of digital cash pegged to sovereign currencies, such as the dollar, to mitigate the volatility associated with cryptocurrencies such as bitcoin. The tokens can be used to make payments outside the traditional banking system (or “tradfi”).

AllUnity is owned by Deutsche Bank’s asset manager, DWS, Galaxy and Flow Traders. Its stablecoin, Eurau, is backed by the Euro. The joint venture is set to transform how and when workers receive their salaries and catapult crypto into the wider public arena, hugely expanding blockchain technology and its usage in common financial operations.

Consumers will no longer be reliant on bank settlements and systems, vulnerable to bank IT glitches and holiday closures. “Eurau will be supported across Zebec’s expanding suite of crypto card products, including an exclusive branded payment card compatible with Apple Pay and Google Pay,” says an announcement. “This will allow users to seamlessly and instantly convert their payroll earnings into spendable funds at millions of merchants worldwide.” It all sounds very exciting.

The move is reflective of what is occurring in the United States where Donald Trump is spearheading what looks set to be an explosion in the use and popularity of stablecoins. Already, $280bn worth are in circulation – and Trump is driving a major push. Of course, his family has its own crypto coin, $TRUMP, something for which he has been heavily criticised. But there is another aspect driving him, which is the determination to ensure the US dollar does not lose out in new markets.

But in Britain, the Bank of England is seemingly intent on pressing ahead with proposals that would limit how many stablecoins people can own. Under the Bank plan, individuals will be restricted to limits of £10,000 to £20,000 and business to £10m. Cryptocurrencies and payment groups say it will put Britain at a strong disadvantage versus other countries. “Imposing caps on stablecoins is bad for UK savers, bad for the City and bad for sterling,” said Tom Duff Gordon, vice-president of international policy at Coinbase, the US crypto asset exchange. “No other major jurisdiction has deemed it necessary to impose caps.”

The Bank’s approach also runs counter to the government’s declared policy of promoting digital innovation and tech. In her Mansion House speech in July, Rachel Reeves said she would “drive forward developments in blockchain technology, including tokenised securities and stablecoins”. Bank governor Andrew Bailey is said to have intervened to stop the chancellor meeting regulators to press them to speed up granting fintech Revolut a banking licence.

Naturally conservative at the best of times, the Bank’s lack of enthusiasm is based on anxiety about the safety of the new technology and the worry that traditional banking will find itself weakened and destabilised as consumers rush to withdraw deposits and pour their cash into crypto. Sasha Mills, the Bank’s executive director for financial market infrastructure, said recently the suggested limits would “mitigate financial stability risks stemming from large and rapid outflows of deposits from the banking sector – for example sudden drops in the provision of credit to businesses and households – and risks posed by newly recognised systemic payment systems as they are scaling up.”

It is an odd way to behave, and denies the British public chances to participate in a revolution that is unfolding elsewhere in a globalised, interconnected world. Where modern finance is concerned, Britain faces the possibility of becoming isolated and mired in the past. Compare that approach with the US Congress, which in July passed the Genius Act introducing a regulatory structure intended to embed stablecoins as a key component of their financial system.

It’s not just those with vested commercial interest who are frustrated. Academic experts, too. Gilles Chemla, a professor at Imperial Business School and co-director of its centre for financial technology, has said: “Stablecoins are no longer experimental technologies – they are becoming the foundation of the global digital economy.” He warns the UK is falling behind on stablecoin regulation. “London has the talent, the markets, and the history to lead the digital economy, but the delay in implementing a regulatory framework for tablecoins is eroding that advantage.”

Crypto is making its own strides to allay some of the Bank’s fears. One weakness is that there is no provision currently for transactions to be cancelled – something that exists in traditional banking, when fraud is suspected or there is a dispute between buyer and seller. Circle, the world’s second biggest stablecoin issuer, is examining ways of making refunds possible. That would run against an inherent attraction of bitcoin, which is its immediacy. Circle is looking at the ability for the parties to agree to make counter-payments in certain circumstances, same as occurs with credit cards. That would mark another step towards bringing crypto towards the mainstream. At least one substantial player is saying it is not averse to copying the best of the historical system, to supply the safety net that exists in traditional banking.

Replicating, adapting, forging ahead. Others are moving fast. Alas, the same cannot be said for the Bank of England or, to use its historical moniker, the Old Lady of Threadneedle Street.