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While the introduction of a central bank digital currency in the U.K., dubbed the Britcoin, could result in the decrease of central bank deposits, the Bank of England said that it would just be another innovation banks need to deal with. The good news for British lenders is that they still have a lot of time to adjust to the new technology as a digital pound isn’t likely to arrive within three years.
Around 20 percent of commercial banking deposits could shift to “Britcoin” once it arrives. This was the estimate given by the Bank of England as central bankers were addressing a House of Lords committee on central bank digital currencies, according to Business Insider.
“Banks would need to adapt,” Bank of England deputy governor for financial stability Sir Jon Cunliffe said. “They would lose a revenue stream from payments.”
“We're seeing a rapid growth of the crypto asset world,” Bank of England Governor Andrew Bailey said. “Issuing a central bank digital currency is a sledgehammer to crack… a nut that has refused to be cracked for a long time.”
However, there are ways banks can offset this decline in revenues from payments. “Banks would have to adjust. They would have to fund themselves more with long-term wholesale debt, and they would lose a revenue stream from payments which, at the moment, is quite a reliable and reasonably substantial revenue stream,” Cunliffe added, Financial News reported.
He also expressed confidence in U.K.’s financial institutions in adapting to the new technology. “It’s not as if we’re talking about a banking model that’s been there [since] time immemorial,” Cunliffe said. “Banks have adjusted to changing circumstances before, and if they’re healthy and competitive, then one would expect them to adjust in the future.”
The good news is that there is still plenty of time for banks to adapt to the changing financial landscape. The Bank of England will begin consulting on plans for launching a Britcoin in 2022 but said that no such CBDC will arrive before 2025, according to Sky News.
The UK's central bank has said it will begin consulting on plans for launching a "Britcoin" next year - but has cautioned that no such central digital currency will arrive before 2025.
“This consultation will begin an open discussion on the role a UK central bank digital currency might play in the UK,” economic secretary to the Treasury John Glen said. “I’d encourage everyone to contribute to the discussion, so we can explore the opportunities this could bring, as well as understanding any risks it may pose.”
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