- The
Bank of England said a reserve-backed digital currency could reduce commercial deposits by 20%. - Central bankers were meeting to discuss '
Britcoin ', a potential name for the digital pound.
The Bank of England has said commercial bank deposits could fall by a fifth if plans for a $4 are implemented.
Central bankers, including governor
"Banks would need to adapt," deputy governor for financial stability Jon Cunliffe said. "They would lose a revenue stream from payments."
A CBDC is a digital currency issued by central banks directly to consumers and backed by fiat reserves. The BoE $4 on its own CBDC, nicknamed 'Britcoin', earlier this month.
The bank's representatives said that the introduction of a Britcoin CBDC would reduce commercial deposits due to faster payments and lower transaction fees.
"We're seeing a rapid growth of the
Alternatives to Britcoin include sterling-pegged $4. But Bailey criticized these assets due to their volatility.
"They're called stablecoins, but I put the word 'stable' in inverted commas," he said. "95% of crypto is unbacked, and the other 5% is stablecoins, some of which are more stable than others."
In theory, stablecoins offer crypto investors greater certainty because they are pegged to a fiat currency like the dollar or the pound. But $4, which runs the largest stablecoin by market capitalization, has been criticized for issuing '$4' about the extent of their dollar backing.
The BoE is one of several central banks exploring a CBDC. China has accelerated its $4 project to launch in time for the 2022 Beijing Winter Olympics, while the Bahamas and Nigeria have launched their '$4' and $4 respectively.