Bank of England steps up planning for ‘Britcoin’
The British government and the Bank of England have set up a taskforce to create a digital sterling or ‘Britcoin’, as central banks worldwide step up their work to beat Big Tech to the punch on creating blockchain-based currencies.
The taskforce still does not commit Britain to actually introducing a BoE-backed alternative to cash and electronic banking. No timeframe was announced for its work.
But it signals a step-up in the intensity and pace of British preparations for central bank digital currencies (CBDCs), as players including the RBA and the European Central Bank press ahead with public consultations and even pilot projects.
“This doesn’t mark a rapid dive into setting up a rival to bitcoin. Far from it. As cryptocurrency investors ride a wave of speculation, the government will be keen to distance itself from what is still seen as the wild west of the payments world,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“However, officials clearly believe they can’t ignore the surge of interest in digital currencies, as a means of faster and more efficient money transfers.
“And there is also the threat hanging over central banks that unless they get their act together and enter the fray, digital currencies backed by Big Tech could end up being dominant in the future, especially as more societies drift towards being cashless.”
On Monday, National Australia Bank director Lisa Wade urged central banks to create digital versions of their fiat currencies so banks are not forced to use more volatile private options.
“If we don’t start building CBDC, people will use alternative mechanisms, and I personally would rather see stable and secure tokens,” she said.
A CBDC creates a secure electronic form of money for payments, based on blockchain. Its value is rooted in the value of an asset or currency, rather than having a bitcoin-like value that can gyrate and fluctuate based on speculative trading.
Stablecoins, as the CBDC and similar systems are known, have the potential to make payments smoother, cheaper and more convenient – and eliminate the uncertainty and residual risk in other forms of electronic payments, and the fiddle of using hard cash.
The ECB last week published a report on its public consultations for a digital euro, in preparation for starting “a formal investigation” in mid-2021 to look at creating a eurozone CBDC.
The consultation revealed that Europeans were very concerned about protecting their privacy, although most understood that if the system was to avoid opening a door to illicit activity then it could not allow full anonymity.