The Bank of England Wants Its Own Version of Crypto
There are several countries over the past few years that have been exploring the idea of utilizing bank-issued currencies to boost financial prowess. Among the only nations to have done so thus far is China, which drew back the curtain on its plans for the digital yuan as early as 2019. While the currency has not been unleashed on the national population, the cryptocurrency has been tested time and time again and used amongst small groups for purchases.
There has been backlash, however, in that many analysts believe China has a nasty trick up its sleeve and is looking to utilize the digital yuan to spy on people to gain insight as to what they are purchasing.
The Bank of England says that it is now establishing a task force in partnership with the U.K. Treasury to learn more about the benefits of a potential bank-issued digital currency and learn about the possible technical complications. In a statement at the beginning of the week, the Bank of England explained:
A CBDC [central bank digital currency] would be a new form of digital money issued by the Bank of England and for use by households and businesses. It would exist alongside cash and bank deposits rather than replacing them.
It is a positive step forward in that the digital currency would not necessarily exist to replace all fiat currency in the U.K. and that users could potentially “get along” with those who choose to remain fiat and credit card users. However, the idea of a bank-based digital currency raises some concerns, the first being that banks are centralized institutions while digital currency is designed to be decentralized.
When a centralized enterprise is tasked with finance, this can present problems in that not everyone can gain access to the services and tools they need to survive. The bank can decide who is able to use their products, and anyone who is deemed “unworthy” gets left in the dust.
By contrast, bitcoin and cryptocurrencies are designed to be used by all. It does not matter what your job history or credit history is. All you need is a digital wallet and an internet connection and boom! You are ready to trade, collect, buy and sell as you see fit.
This Presents a Two-Sided Coin
Thus, should a centralized institution take over crypto, the notion of digital currency being decentralized will come into question. Suddenly, a bank would be charged with deciding who gets to use cryptocurrency and how much they can gain access to, thereby bringing the goals and ideals of crypto to a serious halt.
The Bank of England says it has not cemented any decisions and is still considering the benefits of such an asset.