UK Chancellor of the Exchequer Rishi Sunak told the Bank of England on Monday to look into the matter for a new “Britcoin,” or central bank-backed digital currency, aimed at addressing some of the challenges of cryptocurrencies such as bitcoin.
A BoE-backed digital version of sterling could allow businesses and consumers to hold accounts directly with the bank and bypass others when making payments, negating the lenders’ role in the financial system.
“We are launching a new task force between the Treasury and the Bank of England to coordinate exploratory work regarding a potential central bank digital currency (CBDC),” Sunak told a conference in the financial sector.
Shortly thereafter, Sunak tweeted the single word “Britcoin” in response to the Treasury Department’s announcement of the task force.
Other central banks are also looking into setting up digital versions of their own currencies, essentially widening access to central bank funds that currently only commercial banks can use. This could speed up domestic and foreign payments and reduce risks to financial stability.
China is at the forefront of launching a CBDC. Last week, the European Central Bank said it was studying an electronic form of cash to complement notes and coins, but launch was still several years away.
The BoE said a digital version of sterling wouldn’t replace physical cash or existing bank accounts.
“The government and the Bank of England have not yet made a decision on whether or not to introduce a CBDC in the UK, and will consult extensively with stakeholders on its benefits, risks and practicalities,” said the BoE.
BoE Governor Andrew Bailey has previously said that bitcoin, the best-known cryptocurrency, does not act as a stable store of value or an efficient way to make transactions, making it unsuitable to serve as a currency and a risky bet for investors.
Central banks also had a vague view of Facebook’s efforts to establish its own digital currency.
Still, cryptocurrencies have been gaining increasing interest from mainstream financial institutions, and bitcoin hit a record high of nearly $ 65,000 on April 14, a tenfold increase in a year.
DARK TRADE
Sunak, who launched the UK FinTech Week conference, also announced other measures to maintain London’s post-Brexit competitiveness, which rivals New York as the world’s largest financial center.
Since Britain’s departure from the European Union orbit on December 31, the financial sector has faced restrictions in serving EU customers.
Sunak suggested lifting the restrictions inherited from the EU, including who can trade shares in London and the double volume limit.
This would help Britain attract more “shady” or anonymous trading by big investors after Amsterdam dropped London in January as Europe’s main trading center for equities.
“The consultation process aims to deliver a rulebook that is fair, results-oriented and supports competitiveness, while ensuring that the UK maintains the highest regulatory standards,” said Sunak.
Britain would also propose changes to company stock prospectuses to ensure the rules are “not overly burdensome,” Sunak said.
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