Britcoin CBDC touted as replacement to cash by Bank of England

The Bank of England (BOE) says the UK will impose a 10,000 to 20,000 ($12,017 to $24,033) cap on the holdings of its first digital wallets as it moves forward with plans to introduce a Central Bank Digital Currency (CBDC). is. Formal.

according to bloomberg The BOE plans to introduce a CBDC as early as 2030, according to a report published on February 8.

However, efforts are underway to mitigate the impact of this on the coffers of traditional UK banks.

The BOE is currently in the consultation process until June regarding the adoption of CBDC, which the industry and media have dubbed “Britcoin”.

Bank of England Deputy Governor John Cunliffe has suggested there will likely be a need for a digital version of the pound in the near future to facilitate seamless trading via online and mobile platforms. These developments are being closely monitored by industry experts as they could have a significant impact on the UK’s financial future.

according to government datathe UK financial services sector as a whole will bring in 174 billion in 2022, reaching 8.3% of total economic output.

The 10,000 limit means that three-quarters of people will be able to get their salary in digital pounds, and the 20,000 limit will allow almost everyone to get their salary in digital pounds. says Cunliffe.

Analysts say it is important for regulators to protect CBDCs from manipulation and speculation. BOE wants to create a vehicle that functions like cash and retains its value, but without earning interest or being a tool for speculators. bloomberg report.

A CBDC would give central banks more control over the economy, but some analysts warn it could come at the cost of a diminished role for traditional banks.

Increased adoption of CBDC could lead to a decrease in demand for traditional bank deposits as consumers may choose to hold savings in the form of CBDC instead. Analysts say this could lead to a drop in lending as traditional banks’ revenues decline and banks may struggle to find suitable sources of funding. warned.

Noting that daily transactions using cash are down 60% from just 15 years ago, Cunliffe said the BOE is trying to fill the void left by the decline in the use of regular banknotes. He said the BOE appears to be taking cautious steps in its efforts. To alleviate the concerns of traditional banks.

“It’s probably no coincidence that the pandemic has reduced cash use, but cash holdings have increased,” Cunliffe said.

There are times when people want to know that their money is pegged, or may be pegged in the safest form of cash. If it disappears, I think there is a risk that trust in money will collapse.