Bank of England Endorses Britcoin CBDC as Cash Replacement

At first, the “Britcoin” wallets will be limited to a maximum of £10-20k.

Bank of England Endorses Britcoin CBDC as Cash Replacement

The planned limitation of wallet holdings, in the beginning, is to vary between £10,000 to £20,000 ($12-24k) for the establishing digital currency of the Central Bank, the CBDC (Central Bank Digital Currency), according to a BOE (Bank of England) official. BOE plans to release the CBDC by 2030, reported in the Bloomberg report of Feb. 8th, 2023.

While efforts to alleviate the effects of the CBDC release on the treasury of traditional UK Banks are underway, the BOE undergoes consultation regarding the adoption of the CBDC, known as “Britcoin” in the industry and the media.

The need for the digital version of the pound arises for the future, primarily, to support seamless online transactions through mobile platforms, says Jon Cunliffe, BOE Deputy Governor. Developments are being deeply monitored by industry specialists, as it is to have the most significant impact on the UK’s future of finance. The financial services sector in the UK had brought in roughly £174 billion in 2022, which accounts for 8.3% of the total economic output.

“A limit of £10,000 would mean that three-quarters of people could receive their pay in digital pounds, while a £20,000 limit would allow almost everyone to receive their pay in digital pounds.”

According to analysts, the key to the regulation of CBDC is, protecting it from manipulation and speculation. Bloomberg reported that “the BOE wants to make an instrument that works like cash and holds its value — but won’t accrue interest or become a tool of speculators.”

The CBDC would give the central bank a bigger role in the economy as well as more control over it, while on the contrary, it might reduce the role of traditional banks.

The CBDC adoption could lead to less demand for traditional bank deposits when consumers choose CBDC holdings instead of traditional ones, resulting in less revenue for traditional banks and a decrease in lending, since banks may face a struggle to find funding.

“It’s perhaps no accident that use of cash went down in the pandemic, but the holdings of cash went up,” Cunliffe said. “There are periods when people want to know that their money is anchored or could be anchored in the safest form, which is cash. If we think cash disappears, or it’s just there but hardly usable…then I think you have a risk that confidence in money breaks down.”

Cunliffe says that the use of cash transactions has gone down 60% when compared to 15 years ago, and BOE is seeking to fill the void left by the decline of paper fiat, as well as taking steps to solve the concerns about traditional banks.

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