- UK Chancellor Rishi Sunak is reportedly moving forward with its plans to launch Britcoin.
- The valued of the digital currency would be pegged to that of the pound sterling and should benefit individuals and businesses in the form of lower fees and faster transaction execution times.
- Officials from the Bank of England (BoE) are concerned about implications to monetary policy.
The United Kingdom’s Chancellor Rishi Sunak has shown further support for the launch of a UK digital currency according to sources from within the Treasury Department in a move that is being deemed as “the biggest upheaval in the monetary system for centuries”.
In a report from the Daily Mail released during the weekend, Chancellor Sunak’s plan to introduce the “Britcoin” has been unofficially revealed, with the digital currency expected to become a potential substitute for cash that will be held in accounts directly overseen by the Bank of England.
Britcoin – How would it work?
According to the sources cited by the Mail, Britcoin would facilitate the distribution of direct payments made to the country’s citizens by the Treasury Department such as the cash reliefs disbursed by the government to cushion the impact of the COVID-19 crisis.
Supporters of Sunak’s idea to introduce a central bank-backed cryptocurrency believe that the coin would also reduce the cost and time of transferring money and making payments online within the UK at a point when e-commerce volumes have surged to record highs as a result of pandemic lockdowns.
A new alternative to the traditional banking system
Back in April this year, the UK’s Chancellor set up a task force to study the possibility of launching a cryptocurrency pegged to the pound that would allow individuals and businesses to pay for goods and services and transfer money without having to go through the traditional banking system.
The Treasury Department is reportedly more inclined to go through with the idea than officials from the Bank of England (BoE) as concerns about the central bank’s ability to control monetary policy have been brought up during the discussions.
This ambitious plan to introduce a UK cryptocurrency – a central bank digital currency (CBDC) – has reportedly been inspired by the architecture of the popular Bitcoin (BTC) cryptocurrency.
What are central-bank digital currencies (CBDC)?
As opposed to traditional cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), central bank digital currencies are instruments that are backed by a country’s top monetary authority and their value is pegged to that of the official fiat currency of the nation.
Many multilateral institutions including the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) have voiced their support for an organized introduction of these instruments as the underlying technology that powers them could reduce transactions times and costs for individuals and businesses around the world.
5 countries already using their own digital currencies, another 15 pilot-testing
Many countries have been studying and testing the possibility of introducing their CBDCs, with China possibly spearheading this effort as its digital yuan is already in an advanced stage of development.
According to the Atlantic Council’s CBDC tracker, 5 countries have already launched what could be categorized as the “beta” version of a digital currency including The Bahamas and Antigua and Barbuda.
Meanwhile, another 15 countries are reportedly pilot-testing their CBDCs as is the case of Sweden, Saudi Arabia, the United Arab Emirates (UAE), China, Singapore, and South Korea, among others. Countries like the United States have also hinted at their interest for studying the possibility of introducing a digital currency.
The benefits and challenges of CBDCs
Most of the people who support cryptocurrencies have been attracted by the decentralized nature of these digital assets as they can act as alternative stores of value and means of payment to traditional fiat currencies.
Meanwhile, the underlying technology that powers the crypto ecosystem – the blockchain – is able to maintain the integrity and accuracy of all transaction records made with these tokens and, as the market capitalization of tokens like Bitcoin (BTC) increases, the risk of a hacking diminishes.
With CBDCs being centralized means of exchange, that particular appeal brought by decentralized cryptocurrencies is somehow lost. However, they would open up the possibility of a more stable ecosystem for digital currencies and possibly to the introduction of advanced decentralized blockchain-supported services such as those promoted by the decentralized finance (DeFi) movement.
Britcoin or Bitcoin?
With multiple important nations in the world studying the introduction of digital currencies, it could be just a matter of time before the world moves off cash and towards digital money. For the time being, Bitcoin (BTC) remains the dominant force of this realm as its massive capitalization and robust underlying technology keeps attracting investors and companies who are betting on its widespread adoption as a globally accepted mean of payment.
Buy Cryptocurrencies at Cedar FX, the World’s #1 trading platform!