Britain’s finance minister has launched a “Britcoin” joke and is working with the central bank to consider the possibility of introducing the digital pound.
Bank of England Rishi Sonak At the request of the Secretary of the Treasury, it will study the possibility of introducing a digital currency (CBDC) issued by the British Central Bank, one of its goals will be to meet the challenges presented by the new digital currencies by combining public features with blockchain-based digital money. Consequently, the UK is joining the ranks of countries that have begun testing the implementation of a central bank digital currency, reducing the already declining monetary use rate.
Sonak joked on Twitter about the name “Bitcoin”, even though CDBC is not of the same type of Bitcoin referred to: it is not fundamentally based on a decentralized model, and it doesn’t even try to crowd out commercial banks. However, the digital version of the pound sterling will also allow individuals and companies to maintain direct accounts with the central bank. Obviously, this will also change the role of traditional financial institutions, which would shift more from account management to lending.
And since the currency is issued by the state, there can be no doubt that it is completely anonymous in its use – unlike cash, and in comparison, for example, with card payments. However, at present, only commercial banks have access to central bank funds, which will greatly expand the new solution, boosting domestic and international payments and, as expected, mitigating risks to financial stability. According to the Bank of England, of course, no decision has been made yet on whether such a thing should be introduced in the UK at all, however, the regulatory conditions for this matter are being examined.
There are places where they don’t use cash much
In addition to the British, more and more people have actually set out to realize the central bank digital currency. It is clear that China is at the forefront of these efforts, having developed the electronic yuan since 2014. As we wrote a few days ago, the Chinese central bank will soon expand the testing of the cryptocurrency to include new municipalities after the four major cities so far, which it believes are compatible with the financial system. The current-based issuance and distribution mechanisms are expected to have minimal impact on the banking sector.
Sweden’s Riksbank has been working on the Electronic Crown project since 2017, and earlier last year, a member of the board of directors of the Federal Reserve, the US central bank, spoke seriously about the possibility of issuing a digital currency. On this basis, the Federal Reserve is pursuing with great concern the scathing private initiatives in digital payment systems and tools, many of which operate outside the regulatory framework of the financial system. The introductions are also closely related to the development of cash flow: in this respect, China is also doing well, but in Sweden, for example, the share of cash transactions was already around 2 percent last year, while in the United States it was still much higher than 30 percent.
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