The Bank of England (BoE) alongside several other initiatives is considering the launch of a Central Bank Digital Currency (CBDC).
This is due to the unexpected fall in fiat currency usage. With many blaming the fall on the Coronavirus epidemic. According to a discussion paper by BoE, the bank isn’t the only one considering a digital currency launch. Countries like China are on the brink of a CBDC launch. While the Bank of International Settlement, Bank of Canada, the European Central Bank, the Swiss National Bank, Bank of Japan and Sveriges Riksbank are all looking into the feasibility of a CBDClaunchh. As the UK has experienced a huge drop in fiat usage, especially for general transactions.
A post on the BoE website disclosed that the use of banknotes is fast declining, obviously replaced by digital currencies. The website also added that as an issuer of the safest fiat in the economy, should the bank launch electronic money. Simply put, a digital Pound Sterling. And it is expected to help mitigate the plunge in fiat currency usage. Or should it provide the general public with a “Central Bank Digital Currency – as a complement to physical banknotes”?
Although the bank isn’t convinced of launching a digital currency yet. The bank however clarified that in the event of its launch, the digital pounds will coexist with cash and not supplant it.
Digital currency usage on the rise
Though BoE doesn’t want fiat currency to be replaced by digital currencies, this, however, all depends on usage and users’ choice. Using debit cards as a case study, the use of these electronic cards have surpassed fiat usage in recent times. It is also currently the most popular payment available today.
In 2018, 39% of all payments were made via debit cards as compared to fiat 28%. The use of fiat is expected to slide further downwards. China to curb the spread of Covid’19, has restricted the use of paper money. Some countries are also contemplating this same move to prevent transmission of the disease. This, in essence, will propel people to make use of digital currencies more.
The British Central Bank is also a key player in the launch. The CBDC will be quite different from other digital currencies like Bitcoin, Ethereum, Litecoin, Monero etc. It will be solely issued by government financial agencies as well as institutions.
The bank is also cautious of the fact that the CBDC launch may result in other unforeseen challenges. Irrespective of this, the launch will be a huge plus for the digital currency atmosphere.