After announcing that it is considering the creation of a Central Bank Digital Currency (CBDC), the Bank of England (BoE) has called on the public to contribute their views on the potential benefits and risks associated with the launch of a government-backed cryptocurrency.
According to a 57-page discussion paper released by the central bank today, the BoE acknowledged that there is an ongoing revolution in the global payment industry, as major fintech firms have started utilizing new forms of payments.
The bank’s governor, Mark Carney stressed that despite several efforts made by the BoE in the past to strengthen its payment system, it is high time it braced itself for the new form of payment, and offer the kind of money and payments that will be suitable for a digital economy.
The paper tends to be the basis for further research and dialogue between the BoE and all stakeholders, including the payments industry, payment users, financial institutions, among others.
Carney is calling on the public to provide feedback on whether the BoE should “innovate to provide electronic money — or Central Bank Digital Currency (CBDC) — as a complement to physical banknotes” and also to respond to the Bank on the potential benefits, risks, and practicality of issuing a CBDC.
Carney, in the paper, did not fail to acknowledge the enormous opportunities associated with the CBDC. That includes giving the public continued access to a risk‑free form of money issued by the central bank, especially at a point when the use of fiat currency is fast becoming obsolete.
However, the governor said that the creation of CBDC could create many significant challenges in maintaining monetary and financial stability.
Notably, the Carney reiterated that should the bank decide to develop its CBDC, it would be designed with absolute care because it would directly affect the nation’s financial system.
Central Banks Not Fully Comfortable With Cryptos
It is no longer news that various central banks are bullish on government-backed digital currencies. They are even beginning to work toward developing CBDCs, and few central banks like the People’s Bank of China closer to launching its own digital yuan.
However, despite the central bank’s interest in creating CBDCs, they are not comfortable with other blockchain-based cryptocurrencies, including Bitcoin (BTC) and Ether (ETH), as these coins are regarded as a threat to the current banking system.