Categories: CryptoNews

Bank of England Cancels Plans to Issue a Digital Currency

Central banks all over the world are looking for ways to counter the Bitcoin “threat” these days. Although the issuance of Bitcoin regulation will not do much in this regard, it’s still an option being considered. The Bank of England had plans to issue its own digital currency not that long ago, but it seems this idea has been put on ice indefinitely. That’s due to the potential instability such a currency might cause.

Bank of England Reverses Course

There have been various rumors regarding the Bank of England issuing its own digital currency at some point in the future. This financial institution is not the only one in the world attempting to do so. On paper, it makes a lot of sense for central banks to issue their own digital currencies, especially now that society is slowly moving toward digital-first payments.

However, it seems the Bank of England will not go ahead with its plan to issue a digital currency after all. This news comes as a big surprise to a lot of people, considering that this currency’s launch seemed imminent about a week ago. Something changed between then and now, although no one is exactly sure what. For now, the institution will continue to research cryptocurrencies and their impact on the markets.

According to a spokesperson, the digital currency plans were canceled due to “instability concerns”. It is evident that it is one thing to create a digital currency, but gauging the full impact on the banks and other institutions will not be all that easy. Apparently, the Bank of England is concerned that its digital currency would cause consumers to withdraw funds from commercial banks in short order. Should that happen, none of those financial institutions would have the necessary cash reserves to cope with the demand.

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It is no secret that commercial banks keep very little of their customers’ holdings in cash reserves. If every customer of a specific bank were to withdraw all their money at the same time, the institution would collapse immediately. A similar incident could happen if the Bank of England were to issue its own digital currency. Such havoc is the last thing the British economy needs right now. Furthermore, the BoE fears this digital currency could reduce the impact of its interest rate policy. The banking system is a lot more brittle than most people think; that much is rather evident.

While these plans have been put on ice for the foreseeable future, the central bank’s governor remains enthusiastic about such digital currencies. More specifically, he feels central bank digital currencies offer plenty of positives. The blockchain technology underpinning such currencies is the main selling point in this regard, although it can easily be integrated into central banks without issuing a digital currency per se.

Bank of England still has high hopes for transforming the financial sector in the coming years. Whether or not issuing a native digital currency will ever play a role of significance in those plans remains to be seen. In a way, this is perhaps the smartest decision the institution could make at this point in time. After all, it’s not worth risking an entire nation’s economy just to try out a new “toy”, so to speak.

JP Buntinx

JP Buntinx is a FinTech and Bitcoin enthusiast living in Belgium. His passion for finance and technology made him one of the world's leading freelance Bitcoin writers, and he aims to achieve the same level of respect in the FinTech sector.

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