The Bank of England and Her Majesty's Treasury begin work to create Britcoin. In principle, digital currency would not replace cash, but would be an additional means of payment made available not only to entrepreneurs, but also to households. E-pound (Britcoin) is to show, inter alia, that the British economy is innovative and, despite Brexit and the crisis related to the pandemic, still competitive.
The Bank of England and Her Majesty's Treasury are the two most important financial institutions in the UK. A task force launched by them is to check how the introduction of a virtual currency - Britcoin - can strengthen the country after Brexit. One of the underlying assumptions is that British digital money would be pegged to avoid the radical exchange rate movements we often see in the market cryptocurrency.
- The interest of British financial institutions in the introduction of the national cryptocurrency is not surprising. After all, it is not the first country to think about decentralizing national finances. We see similar movements in China, and the Joe Biden administration is looking more and more favorably on such solutions. In addition, the UK after Brexit must look for new economic challenges and show that its economy and the City of London are still competitive and innovative - emphasizes Marcin Wituś, CEO of Geco.one - a platform for trading digital assets Geco.one, which is a member of the Polish-Estonian Chamber of Commerce.
Private competition is far ahead
A British task force will consult the project with financial institutions, retailers, businesses and consumers in the near future. As emphasized by the Bank of England, digital currency would not replace cash, but would be an additional means of payment made available not only to entrepreneurs, but also to households.
Thanks to the use of blockchain technology, digital currencies enable individuals and companies to make transactions without any interference from "intermediaries" such as banks or governments. - Being innovative is one thing, but central banks are concerned about the growing popularity of cryptocurrencies like Bitcoin. E-currencies are already becoming important payment systems and could replace standard currencies such as the pound in the future - adds Wituś.
As the founder of Geco.one points out, from time to time we hear about the emergence of another grassroots initiative that strengthens the cryptocurrency market. Wituś recalls, inter alia, about the currency introduced by Facebook or the fascination with the cryptocurrency market, which is visible in the statements and actions of Elon Musk, who in 2021 invested about 1,5 billion dollars in the purchase of bitcoins. This definitely increases public awareness and prompts governments around the world to explore how a central bank-backed digital currency can work in practice.
Britcoin will hit tech giants?
- The Britcoin cryptocurrency introduced by the central bank is, firstly, a response to the real demand of the financial market for a new form of money, but also an opportunity for public institutions to reduce the risk of people becoming dependent on making payments through the intermediation of global technology giants and card companies. The introduction of digital currencies of the state into circulation will mean their centralization, i.e. the main assets will be protected by the state and financial institutions - comments the CEO of Geco.one.
As the originators of the task force point out, the step towards the national cryptocurrency is to stimulate the developing fintechs, shift the boundaries of digital finance and increase their efficiency. They also cite the 2016 report on digital currencies. Back then, Positive Money - an organization to reform central banks and introduce alternative monetary policy tools - said the adoption of digital currency would increase the number of monetary tools that banks or politicians could use to stimulate economic growth. They also pointed out that replacing the traditional digital currency may allow for a significant reduction in interest rates, and may also be used as a way to increase aggregate demand, and this may allow for price stabilization.
China is already first
The setting up of a British task force is not surprising when you look across the ocean. There, back in March, Jane Yellen - the US Treasury Secretary - emphasized that the United States should consider the sense of introducing the e-dollar. She also admitted that the digital dollar could enable safer, cheaper and faster payments. And in April, deputy Jerome Powell - in an interview with CBS - added that the Fed is closely studying the development of digital money, but has not yet made a decision whether to continue work on the introduction of the e-dollar. Powell also pointed out that the Central Bank will not issue a virtual dollar without the approval of Congress, and this could significantly extend the entire process.
At the same time, work is also underway in individual states to more widely allow cryptocurrencies to the traditional financial market. One of them is Texas, which wants to join the state of Wyoming and recognize Bitcoin and other cryptocurrencies as legal tender.
However, the most advanced work on introducing a national digital currency continues in China. E-yuan is no longer just a paper-based solution, it is already a pay-off service. In January, 100 people in the Shenzhen region received a total of 000 million digital yuan in the lottery. ATMs have also been established in the province to convert digital currency into cash.
Also countries such as Russia, Japan, Israel and Sweden are actively working on the possible introduction of national currencies. In Estonia, on the other hand, the “Estcoin” project was suspended, but the work on the use of the technology to date blockchainwant to convert there into creating an e-signature.