The Bitcoin revolution Rishi Sunak intends to replace cash with digital currency, the ‘biggest disruption in the monetary system in centuries’
- Bank of England will establish a digital equivalent to physical currency
- According to supporters, the move will provide an economic boost in times of financial crisis.
- It could reduce the time and cost of making online payments and transferring money.
A plan being promoted by Chancellor Rishi Sonak would see cash in the pockets of people replaced by a new digital currency called ‘Bitcoin.
According to Treasury insiders, this would represent the largest disruption in the monetary system’s history. The Bank of England would create a digital equivalent of physical money and control it in the same manner as sterling.
Treasury supporters say it will allow the Bank to boost the economy in times of financial crisis through direct payments of the ‘Britcoins’ into the bank accounts.
Bitcoin could reduce banking costs for small businesses by radically reducing their bank fees. Critics warn that a digital version could cause greater financial instability.
The taskforce of Treasury and Bank officials that was established to evaluate the merits and viability of Bitcoin, also known as the Central Bank Digital Currency, is expected to report to Mr Sunak before the end of this year
It could also reduce the time and cost of making online payments and transferring money between banks.
Bitcoin could reduce banking costs for small businesses significantly. Critics warn that a digital version the pound might lead to greater financial instability, making it more difficult for the Bank to regulate and set interest rates.
Bitcoin’s introduction could also lead to higher mortgage and loan rates, as millions of people switch cash to digital currency from central banks. This would reduce the amount of money that high street banks have to lend to borrowers.
The task force of Treasury and Bank officials that was established to evaluate the merits and viability of Bitcoin, also known as the Central Bank Digital Currency, is expected to report to Mr Sunak before the end of this year.
Because of the large number of people investing in cryptocurrencies, the Treasury seems to be more interested than the Bank of England in the idea of creating a digital currency for the UK. As Bitcoin’s price fluctuated wildly, some investors have suffered huge losses.
Other countries are also working to create their own digital currencies. China has been using a digital yuan to test it; Janet Yellen, the US Treasury secretary, has suggested that a virtual dollar could be created. The European Central Bank is also looking into plans for a new digital euro. Bitcoin, unlike Bitcoin and other cryptocurrencies, would be tied to the pound’s value and supported by the central bank. This should prevent it from increasing in value dramatically.
Officials are considering plans to allow consumers to keep the currency in Bank of England accounts. Officials aren’t sure if Bitcoin will be subject to interest rates, but this could make Bitcoin more attractive for savers than cash.
For ordinary payments, customers could use digital currency to pay their bills at a retailer or other company.
Bitcoin’s potential value to each person is likely to be very limited at first. Bitcoin would allow consumers to convert pound sterling into Bitcoin easily. It would be very easy and fast to convert Bitcoin into cash that can be taken out at an ATM. This could help to avoid long lines that were created when people tried to withdraw their money from Northern Rock in 2007.
The Bank of England would create a digital equivalent to physical money and control it the same as sterling.
It would be much easier to issue so-called helicopter money to customers who have bank accounts linked directly to the Bank of England. This is where the Government injects funds into the pockets of people.
This could be a more efficient way to stimulate the economy during times of crisis than QE.
Since 2009, QE has been used to flood the banking sector with new money. However, QE has been criticised for holding up inflation and failing to transfer cash to households and businesses throughout the economy.
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