Bank Of England Working On CBDC: Doubts Remain

The global monetary system has rapidly evolved upon the impact of digitalization and the industrial revolution. A UK CBDC is likely coming soon.

Governments worldwide, despite initial struggles, started getting more serious about developing central bank digital currency (CBDC).

The UK CBDC is Probably Right Around The Corner

The UK government is setting up a task force to examine CBDC possibilities.

A statement by Chancellor of the Exchequer Jeremy Hunt published on the UK Parliament page on Dec. 9 indicated that the UK government will increasingly look at CBDC’s possible design scenarios and use cases.

“Bringing forward a consultation in the coming weeks to explore the case for a central bank digital currency—a sovereign digital pound—and consult on a potential design. The Bank of England will also release a technology working paper setting out cutting-edge technology considerations informing the potential build of a digital pound,” according to Hunt’s written statement to the parliament.

The British politician is quite bullish on the future role of the country’s digital currency, or digital pound.

Hunt also stated that the Bank of England planned to publish its working efforts on the potential design choices of the CBDC and its case study. However, other members of parliament are taking the opposite stance.

“Central bank digital currencies: a solution in search of a problem?”, a report released by the House of Lords’ Economic Affairs Committee in January discussed the concept of CBDC, its association with the monetary system, and domestic and international use cases.

The report reached an overall conclusion that while CBDC has certain advantages, it also poses significant threats to financial stability and privacy protection. There is no “convincing case for why the UK needs a retail CBDC,” according to the report summary.

Central banks are more drawn to the possible scenario of wholesale CBDCs. With retail CBDCs, the approach is more cautious. Wholesale CBDC development has become a norm across European countries. Bank de France (BDF) said previously that it was focusing on the launch of the CBDC pilot as early as next year.

In addition to actively researching the benefits of the digital euro, the European Central Bank (ECB) is exploring anonymity in this currency. The bank has yet to decide whether or not to launch a retail CBDC.

Governmental Authority and Privacy Perspective

Christine Lagarde, the president of the European Central Bank (ECB), said in a separate statement that the CBDC project has strong political backing and that the ECB is at a relatively advanced level in studying the possibility of a central bank digital currency.

Nevertheless, Lagarde is cognizant of the requirement for a CBDC to safeguard the privacy of customers.

This led the European Central Bank (ECB) and the European Commission to the exploration of possible “cash-like features.” They want to apply a degree of anonymity to the digital euro for reduced value and risk payments.

The deal with CBDCs appears beneficial. Supporters believe they offer much faster, cheaper, and more secure transactions. In addition, users are able to gain direct access to central bank funds through the implementation of blockchain technology, bypassing the need to go through a commercial bank.

However, some members of the ecosystem are of the opinion that CBDCs still have far too many possible pitfalls with governmental authorities and privacy.

A CBDC is a simple digital version of a national fiat currency that is already in use. The way this works is the same as how a banknote does. Unlike cryptocurrency which is decentralized, a CBDC is controlled by a country’s central bank.

In other words, the CBDC is built by the central bank, and the central bank governs all currencies.

Governments and central banks will therefore have simple access to information about users and their transactions since they use this form of legal money to buy things, pay bills, and send money to other people.

It is literally impossible to preserve some level of privacy. Another concern is whether CBDC will develop in tandem with cryptocurrencies or in opposition to them as global regulators try to build crypto regulations.

The post Bank Of England Working On CBDC: Doubts Remain appeared first on Blockonomi.

Related posts

OKX Partners with Komainu, Enabling 24/7 Secure Trading of Segregated Assets Under Custody for Institutions

ST HELLIER, Jersey, June 6th, 2023, Chainwire OKX, the world’s second-largest cryptocurrency…
Read more

Coinbase to Offer Institutional-Sized Bitcoin and Ethereum Futures

Coinbase, the crypto exchange giant, has announced today its launch of Bitcoin and Ethereum futures…
Read more

Circle USDC Deployed On Arbitrum Network

Circle, the leading stablecoin issuer, has announced its plan to deploy its native token USD Coin…
Read more
Become a Trendsetter

Sign up for TheTechly’s Daily Digest and get the latest and trending technology updates.

[mc4wp_form id="729"]