The two worlds of fiat and cryptocurrencies were never meant to collide, but now we have reached a point where the mainstays have openly decided to use blockchain technology. The Bank of England was one of the institutions in the Emix to set up its own cryptocurrency or CBDC
Mark Carney, Governor of the Bank of England, said at a recent conference that banks need to be careful before they fully commit to developing CBDCs.
The Bank of England and its officials have been one of the few examples of institutions supporting the digital asset industry, This support also resulted in open discussions across sectors, sometimes bringing the fiat and crypto world closer than ever before.
The latest statements from the bank came after reports of failing cash usage in Britain. This market situation was reflective of world financial settings as well.
Although the bank has considered adopting a native token, it will still need government approval before moving ahead. Currently, the bank has been in discussions with the public to decide on the range of utilities that the cryptocurrency needs to have.
The BoE Governor was confident that fruitful discussions would fastback the creation of a CBDC. He added:
“While CBDC (central bank digital currency) poses a number of opportunities, it could raise significant challenges for maintaining monetary and financial stability … and would need to be very carefully designed if it were to be introduced.”
The BoE is known for being a stickler for rules and sources have confirmed that the bank will only launch its cryptocurrency after a lot of deliberations. A few months earlier, the bank had attacked Facebook’s Libra for the sheer lack of detail behind the project.
Since then, the Libra Association met with a lot of obstacles on its way. The project is still in the works and a concrete launch date is yet to be fixed.
If all goes well, the BoE plans to denominate the CBDC in Pound Sterling. The bank has assured everyone that the digital asset is not to replace existing standards but rather to help it grow.
Positive Money’s head of policy David Clarke admitted that the government and the central bank must work together to accelerate efforts so that they are not beaten by private companies.
The bank wanted to strike the right balance between cryptocurrencies and fiat so as to not offset the latter. Jon Cunliffe, a deputy governor at the BoE pointed out the problems that may occur if CBDC’s takes over the bank.
According to the bank, several problems may occur in the balance sheets if significant deposit balances are moved from commercial banks to CBDC.
A decision on CBDC is not expected to be made till the end of June as the BoE is in the process of consulting multiple financial bodies.