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28 March 2024
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Bank of England nervous: Bitcoin could be a threat

  • The Governor of the Bank of England (BoE) criticizes Bitcoin as a new means of payment with no intrinsic value.
  • Andrew Bailey is optimistic about stablecoins as the BoE is also working on developing its own central bank-backed digital currency.

While going from Bitcoin as a new potential global cash, according to ECB chief Christine Lagarde no direct danger , but the largest cryptocurrency stands often in the center of important discussions. The Governor of the Bank of England, Andrew Bailey, announced in a public Q + A session that , in his opinion, Bitcoin has no intrinsic value and the extrinsic value only arises because people want to use Bitcoin as a means of payment:

It’s hard to see that Bitcoin has what we tend to call intrinsic value. It can have external value in the sense that people want it.

In the context of the Q&A he further emphasized that he was “very nervous” if people and companies wanted to use Bitcoin as a means of payment, since the volatility is still very high and therefore there are great risks in the transaction processing. But Bailey’s statement is by no means surprising. In a speech at the Brookings Institute last month, Bailey said that cryptocurrencies “have no connection with money at all”.

Bailey is optimistic about stablecoins

In contrast to Bitcoin or Ethereum , the governor of the BoE is convinced of stablecoins that are tied to a real asset such as the USD, the British pound or the euro:

Stablecoins could offer some useful benefits. For example, they could further reduce the friction losses in payments by potentially increasing the speed of payments and lowering costs (especially if global stablecoins were to be introduced).

As a first step, he sees the possibility that a digital currency from the central bank (CBDC) could complement the current financial system:

[…] Either as standalone payment options or with elements of the stablecoin ecosystem, such as wallets, which give consumers access to a CBDC. 

It is noteworthy that the BoE is also currently working on developing its own CBDC. In August, the CEO and founder of L3COS presented the bank with a blockchain-based operating system as the basis for the introduction of the digital British pound. As it was said at the time, this could combat many of today’s problems such as money laundering, fraud or black market financing.

By using the blockchain , each transaction can be traced and fraudsters and money launderers can be identified. The most advanced in the area of ​​the introduction of a CBDC is China. The digital yuan is already being tested in numerous regions of the country .

Recently, China also held a lottery that distributed 10 million digital yuan. Over 2 million people applied for the lottery, and 50,000 people won 200 yuan each. Winners can now use their digital yuan at over 3,000 merchants.

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