- Britcoin is UK’s very own digital currency, or Central Bank Digital Currency, to be issued by the Bank of England.
- The Bank of England has said it is planning to launch Britcoin around 2025.
- The Bank of England and HM Treasury have created a new task force to explore the need, potential, risk, and associated technology to support it
Countries across the world are exploring their own digital currencies, using blockchain technology in a bid to counter the decentralized cryptocurrencies that are getting more and more popular. Recently, the Indian government has declared that it would float a new cryptocurrency bill and gradually ban most cryptocurrencies in the country.
Countries such as Bahamas and Nigeria have already launched their own cryptocurrency Sand dollar and eNaira, respectively, and China has also accelerated its own cryptocurrency to launch in 2022. Further, the European Union has also said that it hopes to launch an eEuro by 2025.
In UK, the Bank of England has said it has started working on plans to launch its own digital currency in the near future. The term, Britcoin, was first touted by Treasury chief Rishi Sunak.
The Bank of England and HM Treasury together created a new task force to explore the need, potential, risk, and necessary technology to support UK’s Central Bank Digital Currency (CBDC). The consultation will start in 2022, but banks aren’t bullish on Brticoins.
The UK’s Central bank said that the CBDC could reduce commercial bank deposits by almost 20% as most customers would go for online payments as they are faster, and the transaction fees is also less. In recent years, the cash transactions in UK have been overtaken by the digital transaction that is a supported by the popularity of cryptocurrencies.
Central bankers are all set to address House of Lords committees to discuss the potential and need of the Central Bank Digital Currencies. In the past, Governor of the Bank of England Andrew Bailey has criticized stablecoins, as 95% of them are unbacked and are highly volatile. However, these coins are pegged to a fiat currency such as dollar.
What is Britcoin (BRIT)?
Britcoin is a popular term that was coined once Central Bank Digital Currency talks were initiated in the UK. Like any other cryptocurrencies, it is expected to enable traders to execute transactions safely and securely without using bank accounts and could be used by anyone for everyday transactions. Rather than replacing, its token will exist alongside commercial deposits.
The increasing popularity of the digital coins grew the fear of financial crisis and as investors are also looking for safer investment opportunities, along with alternatives to fiat currencies.
The Britcoin services went live in July 2011 by software firm Intersango, which was renamed as Britcoin Exchange Intersango in August 2011 after it failed to maintain genuine relationships with UK banks.
Intersango was the first crypto exchange in the country to offer GBP trading, but it was shut down in 2012. So, the trading moved to other sites such as Allcoin.com and Bittrex.com.
Until 2019, Britcoin was acting as an escrow for the funds, and was working to cut down the transaction time from 10 minutes to a few seconds. All the holders were given 5% annual interest. However, it got delisted from various exchanges in 2019 as it failed to gain any traction with traders.
Earlier this year, the Kalifa Fintech Review released that identified priority areas to support the UK’s fintech sector and recommended to promote the digitalization of financial services to offer better services to consumers, enhance fintech environment and drive efficiency in the financial sector.
This is when Central Bank Digital Currency (CBDC) comes in, with report recommending that the development CBDC would support the development of new technologies.
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How would it work?
According to the central bank, CBDC will be denominated in pounds sterling, for example £5 of CBDC would be equivalent to £5 note. CBDC would be guaranteed by the central bank same as cash reducing risks and cost of payment.
Hurdles and hiccups
As majority of the transactions in UK are through cards or online, growing popularity of digital currencies are affecting the cash transactions. However, digital currencies are highly volatile and have environmental concerns. Also, there are concerns that the costs of transactions could leave the currency vulnerable to stablecoins that could threaten the financial stability in the country.
Britcoin claimed to be proof-of-work but only 1% of the available coins could be mined. Its presence on social media sites was very thin and was not marketed efficiently.
It is believed that Britcoin may support the UK economy in the situation of financial crisis as it will allow government to boost economy by directly paying Britcoins in customers’ accounts and make the transaction faster. But it is also criticized as it may cause greater volatility on the market by making it difficult for banks to float regulatory measures.
As CBDC will be controlled by the central bank, all the money flow and transactions will go through the central bank, and they will know everything about the earnings and spending. It will make easier for central bank to tax at the source and may also force to spend it within a timeframe and it will destroy democracy in digital currency.
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At present, popular cryptocurrencies are not regulated by any central authority, whereas Central Bank Digital Currency (CBDC) will be regulated by the central authority and would function as a true fiat currency offering security and convenience. A best of both worlds’ scenario will offer several benefits to country implementing it.
Over 80 countries are in talks to launch their own digital currency and some of the have succeeded in their mission to launch their own CBDC such as Japan, Dubai, Russia, Bahamas, and Nigeria.