‘Britcoin’ hoarding will be banned over bank run fears
CONSUMERS will be blocked from hoarding “digital pounds” issued by the Bank of England because officials fear a run on high street banks, says a consultation paper that suggests a new form of money could be introduced by 2030.
Governor Andrew Bailey and Chancellor Jeremy Hunt revealed a roadmap last night for creating a central bank digital currency (CBDC) – nicknamed “Britcoin” – that could enter circulation by the end of this decade.
The pair would throw their weight behind its creation, saying a digital currency will “likely” be needed in future as cash use continues to decline.
Britons will initially be limited to transferring a few thousand “digital pounds” into their accounts to prevent “large and rapid outflows” from traditional high street banks.
Officials fear that the frictionless nature of digital money would allow people to shift their wealth almost instantly between accounts, giving rise to the risk that banks could collapse if they find themselves under stress and customers begin to withdraw funds.
Mr Hunt insisted last night that “protecting financial stability” was a top priority, adding that “cash is here to stay”.
“A limit on holdings would apply at least in the introductory phase,” the Treasury said. “This would strike a balance between encouraging use and managing risks, such as the potential for large and rapid outflows from banking deposits into digital pounds. These limits could be amended in the future.”
Mr Hunt and Mr Bailey emphasised that CBDCS offer a “new way to pay”. Bank and Treasury officials believe it will promote competition and lead to cheaper financial services. Private sector companies will provide financial services. However, officials are not exploring allowing people to open an account at the Bank of England.
Officials stressed that any statebacked digital currency would sit alongside cash and be worth the same as its banknote equivalent. However, the plans are likely to fuel fears that banknotes could disappear altogether.
A digital pound would be issued by the Bank and would not bear interest. Unlike other digital currencies such as Bitcoin, it would also be risk-free.