The Bank of England is investigating the possibility of launching a bank-backed cryptocurrency within the next year.
The Telegraph recently reported that the United Kingdom might soon boast its very own cryptocurrency. Considering cryptocurrencies’ increasing popularity in the last year, several governments and financial institutions worldwide are looking into incorporating fintech to enhance their respective countries’ economic landscapes.
According to The Telegraph, the Bank of England has recently established a research team to investigate the possibility of launching a cryptocurrency, similar to that of Bitcoin or Ethereum.
The research unit will be expected to write a report on their findings within the next year. However, it is still unclear what exactly the Bank of England’s endgame is. Local media outlets have speculated widely on the suggested cryptocurrency and stated that if the cryptocurrency is not declared legal tender, the Bank of England governor, Mark Carney, might use the cryptocurrency strictly for transactions conducted between central banks across the world.
The issue of a bank-backed cryptocurrency has also raised questions whether the intended digital currency would strictly still be considered a cryptocurrency. The suggested digital currency will be placed under governmental regulation, which undermines the underlying ideas of cryptocurrencies as it was made to be decentralized. While the Bank of England could theoretically create a digital currency prototype which could rival that of bitcoin, it would be impossible for them to gain a similar ecosystem, community, and the several apps and businesses associated with bitcoin.
Bitcoin has especially caught the attention of the general public in 2017, as the cryptocurrency reached unprecedented highs. However, the increased regulation has also caused a regulatory nightmare for financial regulators all over the world.
However, if the Bank of England does decide to create its own digital currency and makes it available to the general public to conduct mainstream transactions, this will likely encourage British citizens to conduct all their banking through the Bank of England, which might threaten the existence of other retail banks in the country. The move could prove to be the catalyst for a major shift in the British economic landscape, and could also change the very nature and practice of current banking.
During a conversation with the Treasury Select Committee that happened before Christmas, Carney was reported as stating that the Bank of England has already engaged in conversation with other British banks regarding the proposed digital currency. Carney added that more meetings would take place in this month. Furthermore, Carney noted that the underlying financial technology is of great interest to the Bank of England. Carney concluded by stating that the technology would be greatly beneficial to ensure financial security and efficiency for citizens as well as between central banks.