UK Chancellor of the Exchequer Rishi Sunak has told the Bank of England (BOE) to look at the case for a potential ‘Britcoin’ or central-bank-backed digital currency.
Sunak told members of a financial industry conference the government was launching a new Treasury and BOE taskforce to conduct exploratory work on a potential central bank digital currency. However, the BOE noted a digital version of sterling would not replace physical cash or existing bank accounts.
A Reuters article highlighted a BOE-backed digital version of sterling could potentially enable businesses and consumers to hold accounts directly with the bank and be able to sidestep other banks when making payments.
The UK joins a number of other central banks worldwide who are currently examining the case for digital versions of their currencies, including current front-runner China. The European Central Bank is also studying a digital currency, but profess any potential launch was ‘several years away’.
A global shift to widen access to central bank funds could potentially speed up domestic and foreign payments while reducing financial instability.
Current BOE Governor Andrew Bailey has previously claimed bitcoin ‘fails to act as a stable store of value or an efficient way to make transactions’, making it a risky bet for investors and ill-suited to serve as a currency.
However, cryptocurrencies are growing in stature, with bitcoin recently hitting a record high of nearly $65,000 on April 14. This is up tenfold within the space of a year.
City of London (COL) Corporation policy chair Catherine McGuiness said, “We warmly welcome the Chancellor’s proposals to enhance the UK’s competitive advantage in FinTech. We are particularly pleased that many of the recommendations made in the Kalifa Review will now be taken forward.
“This is a vital step if we are to maintain the competitiveness of a sector which has a huge role to play in driving the post-pandemic recovery across all sectors of the economy, not only financial services.”
McGuiness also remarked the COL Corporation was happy with steps set out by Sunak to create a new Financial Conduct Authority (FCA) ‘scale box’ as well as an industry-led Centre for Finance, Innovation and Technology as moves to support FinTech’s growth in the UK.
As part of the scale box, the COL Corporation and the FCA will launch the second phase of the Digital Sandbox to enable firms to test concepts that fight sustainability and climate change-linked challenges in the move to transition the financial sector to net-zero.
Copyright © 2021 RegTech Analyst
Copyright © 2018 RegTech Analyst
