Joining ranks with banks across the globe, Bank of England seems ready to venture into the world of cryptocurrency with a digital coin of its own – but not before ensuring risks would be minimal for it to do so. In fact, Bank of England is part of a larger group of central banks which have come together to investigate possible issues with electronic money. Assuming risks are considered to be manageable, the Bank of England may very well release its own digital currency soon.
Central banks working together with Bank of England include Bank of Japan, Swiss National Bank, Bank of Canada, and several others. The central banks are busy combining their resources and research into cryptocurrency, as well as stable coins and bank-related uses for blockchain technologies. The result of the research could lead to a coin termed central bank digital currency and would be used by several central banks worldwide.
According to sources within the Bank of England, the banking group will consider ways that a combined central bank digital currency could (and should) be used. They will also consider various models concerning how international transactions would happen, how the flow of information would be handled, and what technologies would be a part of the overall solution.
Recent interest in private cryptocurrencies, such as Libra, as well as government-backed crypto projects like those being considered in Canada and China, has pushed financial regulators to think outside the box. In recent years, popular digital coins like Bitcoin, have successfully flown under the central bank and government regulation radar, but it seems that those days have now passed. Moving forward, both government financial institutions and central banks are going to have some skin in the game.
Much of the rising popularity for cryptocurrencies comes down to a couple of basic usability features that are afforded by Crypto. The first is that transactions, no matter where in the world they take place, are near instantaneous. The other driving force behind the growth of crypto is that transactions are extremely low in cost. With international transactions often taking up to a week to complete while costing the sender, receiver, or both a considerable sum to send that money, digital currencies begin to make a lot of sense.
Central Banks Test New Ideas
Among the central banks that make up the testing and research group, a few have already begun responding to the call for digital currencies within their respective countries. The central bank in Sweden, Riksbank, is set to implement strategies within Sweden as a result of a drastic change among Swedes in how they spend and use their money. Cash, it seems, is becoming less and less popular in Sweden and the central bank want to remain ahead of the curve. The European Central Bank is also close behind.
There is no doubt that the way society chooses to use money and assets is going through some major changes. While central banks tried to hold off for as long as possible, it is becoming impossible to ignore the need for central banks to join in on the financial shift. With China’s central bank steaming ahead with its plans, and other projects like Libra and others quickly becoming a part of our combined financial reality, we can only expect that more central banks will follow the Bank of England’s lead into a new and exciting era.