The planned cryptocurrency will likely be tied to the pound sterling and have the same value.
2017 came and with it, there was fanfare for Bitcoin. We might have just entered a new year, but the fuss over the cryptocurrency industry will continue increasing. Banks, investors, traders have all hopped onto the cryptocurrency bus as they see a future in it. It is without surprise therefore that the Bank of England is looking into ways it can also make their own cryptocurrency.
The bank is believed to have been working and studying the cryptocurrency industry since 2015, and they finally seem ready to jump onto the bandwagon. The bank is reported to be doing an investigation which might see them launch their own cryptocurrency.
Through virtual currencies rise, their relationships with banks have been nothing short of strained. Banks feature a centralized control and regulation system, while cryptocurrencies are opposite. They have a decentralized, peer to peer way of transactions. One such case of the strained relationship saw the central bank in Poland tell people that cryptocurrency is not money. The bank was trying to discourage people from using it because banks have trouble regulating it.
However, banks can see the potential offered up by the blockchain technology in cryptocurrency and they want to take advantage. It would also allow them to have control over virtual currencies and be able to cut off cryptocurrencies completely. In this measure, the Bank of England is expected to release a report which will be a precursor to it issuing its own cryptocurrency. The bank plans to have the cryptocurrency tie to the same value of the pound sterling.
Mark Carney, the bank governor, however, said there were some obstacles to overcome regardless. Central banks use the centralized system for their transactions across the many accounts in a bank. However, with virtual currencies, users would make transactions without the need for a middleman. Essentially, they would make transactions to any bank at any time without any regulation.
Carney noted that this could pose a problem and said that, if there was any problem with transactions, users could switch in their accounts at the bank without issue. He went on saying that such measures would then force the bank, inundated with so many deposits, to eventually invest the money in some assets.
The situation that the bank finds itself is an interesting problem. Consumers are now more mobile than ever and use debit cards and ATMs to access their money. Physical locations of banks are here and there but people don’t care anymore because they are mobile. If the Bank of England can come in and introduce a decentralized peer to peer cryptocurrency of its own, it would be a game changer. Banks could see the number of locations cut down, downsizing the number of workers and having an impact on the economy.