Cryptocurrency Creation Plans Dropped By The Bank of Englandbr>
The Bank of England (BoE), the UK’s central bank, has reportedly decided to drop the idea of launching its own cryptocurrency amid concerns about its impact on the financial system.
Late last month, British media reported that the BoE has set up a research unit to investigate the possibility of issuing its own cryptocurrency linked to the value of the pound sterling, the currency of the UK. According to those reports, the unit was expected to report back within the next 12 months. If approved, the cryptocurrency would allow UK citizens to keep their money with the central bank itself, cutting out the need for a retail bank.
In a recent statement, the central bank said that while they are continuing to examine the implications of cryptocurrencies, there are no current plans to create a BoE digital currency. The central bank is worried that if they launched a cryptocurrency of its own, consumers might stop using commercial bank accounts and move on to BoE’s digital payments system for transactions and purchase of goods.
The BoE added that creating its own cryptocurrency would lead to commercial banks running out of cash to lend. All the High Street banks would simply become unable to pay their deposits, causing turbulence in the economy.
The central bank is also concerned that a crypto version of the pound sterling would lead to financial instability. The BoE believes that demand for traditional paper money is relatively “elastic”; that is, it responds to changes in its price – interest rate charged on it. The central bank is unsure whether this would continue with the growth of cryptocurrencies, which could potentially weaken its ability to maintain economic stability through the use of interest rates.
The central bank, however, said that it does not view cryptocurrencies like bitcoin as a threat to the stability of the financial system.