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Central bank digital currencies are moving slowly — but not in China

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A mobile phone showing the digital yuan currency of China in Yichang (Hubei province), China on February 22, 2021

Barcroft Media – Getty Images| Barcroft Media | Getty Images

Don’t expect central banks to issue their own digital currencies anytime soon — that was the message from the Bank of England this week.

Tuesday’s statement by the U.K. central banks stated that they were moving towards their goals exploration of central bank digital currenciesCBDCs to the consultation stage, which is due to occur next year.

However, even if they decide to go ahead with their proposed digital currency “Britcoin”, it won’t arrive until 2025 at the earliest, according to the BOE. It’s possible to make it work if you prove that it is technologically and operationally stable.

Anne Boden, the CEO of Starling’s digital bank based in London, stated that Britcoin has yet to answer a crucial question. Boden is one. several industry executivesAs part of their exploration into CBDCs, U.K. officials will receive your input.

Boden said last week to CNBC that everything in the space must solve a problem. It must be easy to use and accessible enough to offer real value.

There has been a rise in interest for bitcoin and other cryptocurrency. reignited central banks’ ambitionsRecently, they are able to create their own digital currencies.

However, CBDC projects have been moving slowly so far. Sweden was the most successful. early to the CBDC gameAccording to, the company hopes to launch a digital copy of its krona before 2026.

China is, on the contrary, home to the central bank. racing ahead with its own CBDC projectA virtual version of the Yuan was launched in several provinces as part of trials. Experts believe that the People’s Bank of China (PBC) will be the first CBDC to go live.

The PBOC’s Digital Yuan is not as attractive to Western nations because of a variety of issues. It is criticised for being too centralized and potentially used by the government to increase surveillance. Because digital transactions are not as easily tracked online, they can also be used to track cash transactions.

The ‘Massively Overhyped’

Garrick Hileman (head of research at Blockchain.com) and visiting fellow in the London School of Economics said that talk of digital currencies issued by the central banks mimics late 2017 hype surrounding blockchain. seismic rally before plunging sharply.

There are several major banks had talkedBlockchain, the distributed ledger technology that underpins cryptocurrencies, has huge potential. However, they rejected the possibility of cryptocurrency and digital coins being mainstream financial trends.

Hileman stated that CBDCs are at risk of becoming overhyped, and not delivering on their promises.

“The questions that need to be discussed to design an effective CBDC — like privacy, like surveillance — are things that are way above the paygrade of every central banker.”

There are plenty of issues to be ironed out in the development of CBDCs — not least when it comes to ensuring privacy and avoiding financial censorship.

Also, bankers worry that CBDCs will undermine their ability to manage the financial system. This could increase the likelihood of a “bank ran”. The risk of a bank run is increased by consumers who may be more inclined to deposit their funds directly with the central banks than keep their money at their bank.

Even if you believe you have the right mousetrap to stop a run, it’s still a good idea. HSBCAnd NatwestHileman stated that the Bank of England is perceived as safe, but until it’s tested in battle we don’t really know.”

However, no matter what form “Britcoin”, or other CBDCs, takes, it’s clear that the transition from analog to digital is imminent.

Hileman said, “We have been discussing CBDCs since years.” This is now on central bank radar.

Boden expressed hope that the Bank of England will not take too long to assess the potential of the U.K. CBDC.

She stated that “the world is changing.” “The U.K. is at the forefront in many of the new payment systems.”

“If anything is happening in the space I would hope the Bank of England has it thinking soon.”

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