According to recent news reports this week, British Chancellor Rishi Sunak informed the Bank of England to consider the possibility of a new “Britcoin”, or central bank-backed digital currency focused on managing some of the challenges created by popular cryptocurrencies like Bitcoin. In keeping with this idea, the aim of the venture is to create a BoE-backed digital form of sterling which would potentially enable enterprises and consumers to incorporate accounts directly with the bank, thus empowering clients to sidestep ancillary stakeholders when completing transactions. The move is aimed at upending the lenders’ role in the financial ecosystem.
Even as such a shadow currency is under consideration, the BoE stated that the digital sterling is not likely to replace physical cash or existing bank accounts. The focus on creating a Britcoin comes following the authorities’ belief that the popular Bitcoin does not act as a stable store of value or an efficient way to make transactions. These factors create a hazard and make the virtual currency ill-suited for transactional or investment purposes.
Globally, several central banks are now considering the launch of digital versions of their own currencies, thereby enhancing access to central bank funds that are only accessible to commercial banks in the current scenario. Such a process is likely to boost both domestic and foreign payments and mitigate risks to financial stability.
The countries and regions considering such a move include China, who aims to launch a CBDC and the European Union’s central bank which us analysing an electronic form of cash to augment physical currency. However, it can be safely assumed that such initiatives are still some time away.
Mr Sunak also mentioned initiatives aimed at maintaining London’s post-Brexit competitiveness. The capital competes United States of America’s New York for the coveted epithet of the world’s largest financial centre. In addition, the move is expected to bolster UK’s financial sector which has faced restrictions on serving EU customers since the country’s exit from the European Union on December 31.