Bank of England: OK, to own digital currency

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As crypto enthusiast Anthony Pompliano likes saying, “the virus is spreading”. So it sounds not strange that the head of British central bank (the governor of Bank of England) Mark Carney has proclaimed warm reception of idea regarding bank’s own digital currency creation. He talked about it during his speech he delivered 25-th of May at headquarters of Swedish Riksbank in Stockholm. Here solemn ceremony honoring 350th birthday of Riksbank was held. It’s curious that “virus is really spreading” since Riksbank is discussing the opportunity to launch its own cryptocrurrency in Sweden — e-krona.

As far as it concerns Mark Carney one can see crucial change Carney has made regarding crypto issue since he in February stated that cryptocurrency “has pretty much failed thus far on… the traditional aspects of money. It is not a store of value because it is all over the map. Nobody uses it as a medium of exchange”. He said during the Questions & Answers session he held at Regent’s University in London.

Now the Bank od England has somewhat draft of “White Paper” of possible crypo scenarios for itself. Michael Kumhof and Clare Noone have worked out “Staff Working Paper No. 725. Central bank digital currencies — design principles and balance sheet implications” appeared this month. The researchers introduce new term of central bank digital currency (CBDC). Actually they postulates one of the important principle for CBDC: “the central bank only exchanges CBDC for eligible securities of its choosing, such as government securities” (p. 17) It means that British CBDC is going to be like Venezuelan El Petro backed by oil barrels of coming Petro Oro stipulated to be backed by some gold reserves Venezuela still possesses.

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The conclusion authors has come to is that any scenarios of minting central bank’s digital coins implies no risk for British financial system in terms of credit and liquidity provisions. This conclusion is contradictory to words delivered by some representatives of Bank of England at the dawn of this year when they stated that issuing own digital currency might inflict capital outflow from UK.

Of course, Mark Carney is still cautious regarding further plans and says that appearance of own digital coins may not happen soon and stresses that existing cryptocurrencies can not be treated as ordinary money. At the same time Mark Carney admitted that Bank of England began scrutinizing crypto sphere since the central bank was working over issues relating Brexit and how to get all things done easier. Bank of England is also seeking instruments that will help British economy withstand any obstacles it may face during the period when UK will actually begin floating free of EU. Some critics of state backed cryptocurrency concept point to the possibility that such e-coins may be used a surveillance tool to watch literally every transaction people make.

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