By Shelly Melancon (Switzerland)
Following plans by the Bank of England (BoE) to release a central bank digital currency (CBDC), Tom Hutton, BoE’s director of CBDC, has highlighted the benefits of a digital currency in a Tweet on June 17. The Bank of England is planning to issue a CBDC to keep up with the trend of cryptocurrencies. Christine Lagarde, President of European Central Bank (ECB) had also in an interview with Bloomberg in March said if possible, the digital euro will be issued in four years or more. Director Mutton also noted that the development of CBDCs bears so many prospects for the United Kingdom.
The director opined that CBDCs could be the most secure currencies all over the world and further urged the government and the Bank of England to consolidate their efforts in releasing a Digital Euro. He believes, as acknowledged by Christine Lagarde, that the launch of a Digital Euro could take longer than the four years slated. However, he said the government and the BoE have lots of input to make.
Other Countries Looking to Issue CBDCs
Lately, there have been calls for a central
bank-backed digital currency, with countries like China, Canada, the US looking to make a foray into the idea. In fact, China has made considerable progress on the Digital Yuan, although a release date is yet to be announced by the Chinese government. According to official sources, the Digital Yuan was proposed to stop the proliferation of private payment platforms such as Alipay in the country. On the contrary, speculations have emerged that China plans to use the Digital Yuan to spy on the transactions of its citizens. The Chinese government has summarily dismissed these claims.
Also read:Concerns Expressed Over CBDCs
Reports have indicated that a CBDC produced by the Bank of England would be vulnerable to more control by the central bank than normal money. Officials opined that production of a CBDC would be easy and can be easily controlled based on its digital nature. While officials may see this as an advantage, some respondents of a survey conducted by investment banking company Morgan Stanley think otherwise. Most respondents expressed fears over privacy; other concerns by the other respondents bordered on security, universality, additional costs, and offline use.
In light of these concerns, experts in economics and security have also expressed worry over cyber attacks and as such urged central banks to make extra commitment to security measures. Director Mutton concurred and said that central banks should not release digital currencies in a haste as it may not augur well. Hence, they have to consider potential risks and address them prior to releasing them to the public.
Other countries in the euro-zone have joined in the research on a digital Euro. In another report by Tokenhell, the BoE considered the implications of not releasing a CBDC. Some of these implications include; local and cross-border payments would be controlled by foreign solution providers; the potential threat posed by the emergence of digital currencies created by renowned tech companies (Facebook’s Diem); the release of a CBDC would foster the hegemony of local payment systems and the adoption of the digital currency internationally.
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