The Bank of Great Britain released “A New Form of Digital Currency,” calling for regulation to be held to the same standard as bank deposits

The report says that before new forms of digital money “can be widely used, issues of currency security and macroeconomic stability need to be addressed.

The Bank of Great Britain released "A New Form of Digital Currency," calling for regulation to be held to the same standard as bank deposits

On June 7, the Bank of Great Britain released a research report titled “New Forms of Digital Currency”. According to the report, new forms of digital currency “need to address issues of monetary security and macroeconomic stability before they can be widely used”. The report states that if digital currency is to gain popularity, it should meet the same standards as today’s bank deposits, and intends to call on countries to build a strict and regulated regulatory framework for digital currency.

Governor Bailey noted in the report that “rapid innovation in payment methods has occurred over the past 10 years, and with the new crown epidemic, this innovation is accelerating …… cash payments are declining in size, and the demand for payment convenience, such as e-commerce, has stimulated public interest in digital payments …… large fintech companies, are also developing new forms of alternatives to traditional currency.”

In the report, Bailey said that the Bank of Great Britain has not yet decided whether to issue CBDCs and that “a range of issues still need to be considered in consultation with government agencies.”

The report identifies crypto-assets as a new way that can become a function of payment and preservation of value, and strongly calls on relevant institutions that should establish a sound monitoring system in order for crypto-assets to fulfill these 2 functions.

This report by the Bank of Great Britain is still open for global consultation, and the call for submissions is open until September.

As Chaintech has pointed out before, the UK’s CBDC has also been pushing forward. In April this year, the Bank of Great Britain said it had set up a new working group to explore with the Treasury the possibility of CBDC importation and the future.

There is even news that British Chancellor of the Exchequer Rishi Sunak advocates the issuance of “Britcoin”, but nothing is clear, and whether to continue is also under discussion.

Opportunity: Digital currency may strengthen the power of monetary policy guidance
In April, the Bank of Great Britain said in a statement that any central bank digital currency could be a new form of digital currency that could be used by households and businesses. The first sentence of the summary of this report reads.

“New forms of digital currency, whether publicly or privately offered, would be the latest innovation in the evolving economy’s approach to payments. They can contribute to faster, cheaper, and more efficient payments. They may enhance financial inclusion, but they may also pose risks.”
The report acknowledges that new forms of digital currencies “may offer benefits in terms of cost and functionality, and may also strengthen the guiding power of monetary policy.”

So, the tone of this report looks favorable to digital currency. The madness of the cryptocurrency world is a tiger and a wolf in the eyes of traditional financial institutions, and a great opportunity for central banks, and for the Bank of Great Britain is no exception.

Challenge: What central banks need to do is guard the door
The report also said that the overheating of digital currencies can threaten the stability of the traditional financial system. On the one hand investment wise, a lot of money is being diverted to digital currencies. On the other hand, the central bank will lose control of interest rates, but also the loss of various traditional functions, especially in times of inflation, the threat will be obvious.

The Bank of Great Britain continues to believe that a sudden overheating will inevitably lead to the agitation of speculators, and therefore speaks in a suppressed manner, calling on countries to establish a more solid and sound regulatory system before digital assets overheat. And, most importantly, technically ahead of the curve.

Stable coin or CBDC?
The Bank of Great Britain says this new form of digital currency could be a “stablecoin” issued by a private company or a CBDC issued by a central bank, so the new form of digital currency will have to fulfill its mission in absolute security.

For corporate-issued stablecoins, the report argues that “gaining the trust of users is crucial, on par with existing currencies,” and calls for the stability of the entire financial system to be compromised if there is not sufficient regulation.

The report was also released during the G7 summit, at a time when support for central banks in Europe and the United States is inevitably sought. The current G7 finance ministers are also present, and the eyes of the financial giants are not far from the wind for a moment.

As we all know, the world’s first CBDC 2020 has already landed, and China’s central bank digital currency has also long been through many rounds of practice, in many cities to complete the layout, but also with Alipay, the People’s Bank of China’s system to complete the coupling experiment.

The G7 participants of several developed countries, from 2020 began to call for a “huddle”, pre-emptive, also calling on member countries to establish a good “protective wall” of regulatory policy, so this report, in fact, is also a more obvious intention to seek umbrella behavior.

Although the CBDC of the Bank of Great Britain is still under discussion, it is still unlikely that countries will recognize the stable coin Diem issued by Facebook. Because the report states in the opening section that

“The Financial Policy Committee has set expectations for stablecoins. These are intended to ensure that the public has the same confidence in stablecoins as in commercial bank currencies. The regulatory model outlined in this report illustrates potential ways to meet these expectations, establishing a secure regulatory environment for stablecoins to operate in the UK, and will also provide a clear foundation for sustainable innovation. Importantly, there is significant uncertainty about the demand for new digital currencies and their impact on the economy. Therefore, precautionary measures may be required to allow room to assess the impact of new forms of digital currency on the financial system once they have been launched.”
The only short-term phenomenon that can be predicted is that national banks will silently launch CBDCs with a poor technical foundation while building high walls, and then finally, in the spirit of “openness,” partner with private companies to get a piece of the action in order to raise the technical bar.

Posted by:CoinYuppie,Reprinted with attribution to:
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