Another Impressive Week for Central Banks’ Digital Currencies
This week a couple of major events have taken place in the Central Bank Digital Currencies arena; one of the first central banks, the central bank of England, and the British administration closely working together reported that a digital pound would likely be important at some instance in the future.
While they were announcing that, long queues were gathering at ATMs across Nigeria, the first large economy to roll out a Central Bank Digital Currency as most Nigerian citizen face challenges in accessing physical currency following the administration’s catastrophic demonetization campaign.
Focusing on the United Kingdom, whose recent Chancellor of the Exchequer, Jeremy Hunt, explained Central Bank Digital Currency as a trusted and fresh way to make payments that will likely materialize sometime in the future.
The Deputy Governor for Financial Stability of the Bank of England, John Cunliffe, announced that their priority is that on recent trends it is possible that a retail, general purpose central Bank Digital currency, a digital pound, will be required in the United Kingdom.
With hard cash usage on the low in the United Kingdom, a digital pound would play the anchor function that cash recently carries, enabling the customer access to Bank of England money would also avoid the risks associated with stablecoins which are relatively a fragment of crypto that is attached to the price of fiat currency like the euro or dollar, meanwhile ascertaining that various tech companies are not capable of monopolizing areas of the active market with their currency.
An Extra Level of Operations
One major effect is its impact on the central Banking Structure. As the United Kingdom-based economist and the author of Prince of the Yen, Richard Werner, announced that if central banks were to provide retail Central Bank Digital Currencies directly to customers and institutions, suggesting that they would all be allowed to hold the same current account at the central bank.
Following these events, it might lead to the creation of mono-banking, in which only one lender is capable of operating. The Bank of England is seeking to impose a limit on the new digital pound of 10,000 euros to 20,000 euros once it comes into play to counter these events. The new currency will also not bear interest.
The final thing that the global central banks need to do is eliminate larger private banks, whose interest they intend to oblige above all else. For instance, central banks are working closely with several TBTF lenders to formulate the Central Bank Digital Currency structure.
However, the Bank of England and several other Central Banks are discussing setting up an extra level of operations within the financial structure. Meanwhile, the Bank of England might formulate the currency, and private institutions will be the primary public interface for the new level.
Other Impacts of the Central Bank Digital Currency
Central Bank Digital Currencies will give central banks more authority over payment trends. Given the major role played by the Central Bank Policy in intensifying wealth and income discrepancies in the future.
The plan for central banks to acquire even more power should indicate a serious pause. For example, one of the key risks captured by the House of Lords economic committee report on Central Bank Digital Currencies is that it would offer Central Banks even more power without sufficient investigation.