Bank of England considering its Own Cryptocurrency
The Bank of England has appointed a research team to determine whether it would be beneficial to create its own cryptocurrency. This report is not surprising considering that governments, along with their reserve banks, around the world have been planning to develop their own cryptocurrencies. For example, Venezuela will soon be launching its own petro cryptocurrency, which will be backed by 5 billion barrels of oil .
It’s quite possible that the Bank of England could back or somehow associate its new cryptocurrency with the sterling. This might eliminate the need for retail banks, because people could simply keep their money with the Bank of England. Mark Carney, the central bank’s governor, acknowledges that monetary transactions between banks and financial institutions could be improved by using blockchain technology. However, he also believes that it could lead to financial instability if the scope of the new cryptocurrency is broadened to the country’s entire economy.
RSCoin Proposed in Early 2017
This isn’t the first time that the Bank of England has attempted to create its own version of bitcoin or cryptocurrency. RSCoin, a digital currency tailored for central banks, was created back in February 2016. The team behind the development of RSCoin included a couple of students from University College in London. It was promoted by claims that it was supposed be better than bitcoin because it offered much faster transaction processing speeds. However, critics cited concerns that it didn’t have much utility as far as banking was concerned.
Of course, the principal difference between RSCoin and bitcoin was that RSCoin’s ledger would be in control of the central bank. Clearly, this is against the idea of decentralization, because no single entity controls bitcoin’s ledger. This is what makes bitcoin and the majority of the other cryptocurrencies appealing to most crypto-enthusiasts. It’s not really known what happened to RSCoin, since there aren’t any credible reports or updates about it.
Central Banks have Reservations
Throughout the years, central banks have expressed their reservations about cryptocurrencies, including those that could be issued and controlled by a government bank. For instance, the US Federal Reserve has said that a central bank issued cryptocurrency could pose “privacy issues”. Bank of Japan has no upcoming plan to create its own cryptocurrencies. Haruhiko Kuroda, governor of Bank of Japan, has stated that, “Issuing CBDC (central bank digital currency) to the general public is as if a central bank extends the access to its accounts to anyone”.
It’s quite probable that, just like the Bank of England, central banks and retail banks are just beginning to understand cryptocurrencies and blockchain technology. South Korean and Japanese banks have engaged in a major pilot study to see if payments can be processed more efficiently using cryptocurrencies. Their currency of choice was Ripple’s XRP, which is centralized, unlike the majority of cryptocurrencies. In conclusion, governments might have expressed their reservations, skepticism, and criticism about cryptocurrencies. But, there’s no doubt that they have assigned research teams to study and analyze them. This implies that banks do think that cryptocurrencies and the crypto-market has become relevant and they can no longer choose to remain ignorant about it.