Bank of England Issues Warning on Crypto Adoption
Can crypto adoption destabilize economies in the future?
Bank of England’s (BoE) deputy governor of financial stability Sir Jon, notified that a rapid increase in the crypto economy may eventually reduce or even cut-off bank credit issuance.
On 28 February, at the London School of Economics in a recent speech, he concluded a prediction that usage of stable coins on social platforms may help people to transfer their money currently available in banks into stable coin wallets. This clearly states the bank of England issues warning on crypto adoption as per current circumstances.
The British representative to the European Union added that “BoE’s major role is to confirm whether all U.K. money is utilized safely and reliably or not”. He also informed that digital currencies pose an imperative role in queries for the Bank of England, the U.K. government, and regulators.
Highlights on Bank of England Issues Warning on Crypto Adoption
The Bank of England (BoE) will check how people could accept a bitcoin style digital currency as a part of a worldwide group of central banks that have participated in scrutinizing the possible potential drawbacks of depending on electronic money. The BoE’s deputy governor Jon Cunliffe will lead the group with Benoit Coeure, a Former ECB board member and head of the BIS revolution hub.
Bank executives will conduct a meeting with some foremost global banks such as Bank of Canada, Swiss National Bank, European Central Bank, and Bank for International Settlements to share research and experiences of potential for a central bank digital currency.
This step emerged in digital currencies, private sectors such as bitcoin and Facebook Libra that is going to be launched very soon. Moreover, Facebook’s strategies for a digital wallet and libra coin have got the maximum attention of the targeted audience, including regulators and global central banks. Libra would need to be regulated as per bank of England issues warning on crypto adoption, due to which many supporters will not further continue their association with digital currency.
Central Bank Digital Currency (CBDC) idea has been hitting the global ground and help to improve cross-border transactions and payment systems. Moreover, new committees will handle CBDC use cases such as economic, functional, and technical design choices with cross-border compatibility and information sharing on fast-paced technologies. It will also interact with other global groups and forums, including the Financial Stability Board and the group on payments and market infrastructures (CPMI) that is led by Jon Cunliffe.
Some Possible Risks of Stablecoins
The Bank of England representatives admitted in the on-going financial system that “it is similar to 18th-century bank clerks that are responsive to changing their bank ledgers just to debit one account and credit another.”
Jon Cunliffe states those officials must be ready for possible risks linked with stable coins before reaching to a systemic footprint. He continued adding in the bank of England issues warning on crypto adoption that “as a result of Facebook size, stable coin Libra has the potential to target adoption levels that could turn it systemically important. He also said that the Financial Stability Board (FSB) would issue a report this year on the regularity recommendation for stable coins.
More about Bank of England Issues Warning on Crypto Adoption
In the last month, Sweden’s central bank stated that it would sign an agreement with consultancy firms to build a platform for digital currency. The European Central Bank has been exploring the possible advantages of CBDX since last year. The Riksbank also has been finding the idea of its digital currency from few years due to the prominent decrease in cash used in Sweden.
Stable coins offer a wide range of advantages such as a huge drop in payments overheads, especially for cross-border, and enormous financial inclusion through simple access to payment services to the unbanked.