Britcoin not bitcoin? UK considers new digital currency
On Monday, British Finance Minister Rishi Sunak asked the Bank of England to consider the argument for a new “Britcoin,” or central bank-backed digital currency, aimed at addressing some of the issues posed by cryptocurrencies such as bitcoin.
A digital form of sterling backed by the Bank of England may enable companies and customers to keep accounts directly with the bank and avoid intermediaries while making purchases, upending the lenders’ position in the financial system.
Sunak said at a financial sector conference, “We’re starting a joint taskforce between the Treasury and the Bank of England to organise exploratory work on a possible central bank digital currency (CBDC).”
Soon after, in response to the finance ministry’s declaration of the taskforce, Sunak tweeted the single term “Britcoin.”
Other central banks are now considering whether to create digital copies of their own currencies, effectively broadening access to central bank funds that are currently only available to commercial banks. This could and financial stability threats by speeding up domestic and international payments.
China is the front-runner to create a CBDC. The European Central Bank announced last week that it was researching an automated type of cash to supplement banknotes and coins, but that any launch will be many years away.
The Bank of England stated that a digital form of sterling would not substitute actual cash or current bank accounts.
“The Government and the Bank of England have not yet decided whether to implement a CBDC in the UK, and will consult closely with stakeholders on the advantages, costs, and practicalities of doing so,” the BoE said.
Bitcoin, the most well-known blockchain, struggles to function as a secure store of value or an effective way to render transfers, rendering it unsuitable for use as a currency and a dangerous gamble for investors, according to BoE Governor Andrew Bailey.
Central banks were also sceptical of Facebook’s plans to create its own digital currency.
Despite this, mainstream financial firms are increasingly interested in cryptocurrencies, and bitcoin reached a record high of nearly $65,000 on April 14, up tenfold in a year.
TRADING IN THE DARK
Sunak, who launched the UK FinTech Week meeting, also revealed other initiatives aimed at preserving London’s post-Brexit competitiveness, which competes with New York for the title of world’s largest financial centre.
With the United Kingdom’s exit from the European Union on December 31, the financial market has faced limits on servicing EU clients.
Sunak advocated lifting limits inherited from the EU, such as the double amount limit and who should exchange shares in London.
This will assist Britain in attracting more “dark” or anonymous trade by large buyers, after Amsterdam surpassed London as Europe’s highest share trading centre in January.
“The consultation mechanism seeks to produce a rulebook that is equitable, outcomes-based, and promotes competition, while ensuring the UK retains the highest regulatory standards,” Sunak said.
Sunak said that Britain will also propose amendments to corporations’ securities prospectuses to guarantee that the regulations are “not excessively burdensome.”