Just a little over three months ago, the BIS (the central bank for central banks), released a fairly detailed discussion of cryptocurrencies that sought to answer the following question:
What are CBCCs?
“CBCC” stands for central bank cryptocurrencies and as we and plenty of other folks have variously suggested, it’s just a matter of time before the world’s monetary authorities launch their own digital currencies.
Of course the mere mention of this possibility is enough to send the crypto crowd into conniption fits. But the bottom line is that if you assume people are transacting for legitimate reasons, well then it’s not entirely clear why central banks can’t simply co-opt this idea.
“If anonymity is not seen as important, then most of the alleged benefits of retail CBCCs can be achieved by giving the public access to accounts at the central bank, something that has been technically feasible for a long time but which central banks have mostly stayed away from,” the BIS wrote, in the September paper referenced above and embedded in full below.
Well sure enough, the Telegraph is out reporting that the Bank of England is preparing to launch a pound-based digital currency.
“The Bank of England could green light its own Bitcoin-style digital currency as early as 2018,” The Telegraph reported on Saturday evening, adding that “a Bank of England-issued digital currency would potentially allow British citizens to keep their money – in digital form – with the central bank itself, dispensing with the need for a retail bank.”
That would mean large purchases – like buying a home or a car – could be completed “in nanoseconds.”
Apparently, the BoE wasn’t as far behind the curve on this as the crypto crowd might have imagined and really that shouldn’t come as a surprise given that they’ve been publicly poking around at this for quite a while. The Telegraph says the bank had a research unit working on it for at least two years and that unit is expected to “report back” within the next 12 months.
“The Bank has been trialling technology for digital transactions, using the same technology that underpins Bitcoin,” the Telegraph goes on to note.
Of course the added benefit here for a central bank is that they could more effectively micromanage the money supply because they would know exactly what was going on at any given time with all kinds of granularity.
The Sunday Times, in its own piece, confirmed that The BoE has set up a research unit “to examine digital currencies including bitcoin, in an attempt to learn how they might transform the financial system,” but also said the following:
Reports that a new digital currency linked to sterling could be launched in the new year should be regarded with caution.
Well, yes. That goes without saying. I don’t think anyone is expecting the BoE to simply announce “sterlingcoin” out of the clear blue sky at the next policy meeting.
The point here is that one way or another this is going to happen eventually and will have far-reaching ramifications not only for the cryptosphere, but also for the retail banking industry and for fractional reserve banking in general.
Below, find the BIS’s September paper on central bank cryptocurrencies…