The Bank of England has taken a measured approach to cryptocurrency, acknowledging its potential benefits and risks. In this blog post, we will explore what the Bank of England has said about cryptocurrency and how it has approached this new and rapidly evolving asset class.
History of the Bank of England’s Involvement with Cryptocurrency
The Bank of England has been closely monitoring developments in the cryptocurrency space for several years. In 2014, it established a research group to study the potential uses and implications of digital currencies.
Since then, the Bank has published several reports and issued statements on cryptocurrency, including its potential role in the future of money and the financial system.
The Bank of England’s Approach to Cryptocurrency
While the Bank of England has not yet taken any formal action on cryptocurrency, it has made it clear that it is open to exploring the potential benefits and risks of this new asset class.
In a statement issued in 2018, the Bank emphasized the importance of ensuring that any new developments in the financial system are “safe, secure, and resilient.”
At the same time, the Bank has acknowledged the potential benefits of cryptocurrency, including its ability to provide a faster and more efficient means of making payments, as well as its potential to increase financial inclusion by providing access to financial services for underserved populations.
Potential Risks and Concerns
Despite the potential benefits of cryptocurrency, the Bank of England has also recognized the potential risks associated with this asset class.
These risks include the potential for money laundering and financing of terrorism, as well as the risk of financial instability if a significant portion of the financial system were to become dependent on cryptocurrencies.
The Bank of England has also expressed concerns about the volatility and lack of regulation in the cryptocurrency market, which could lead to significant losses for investors.
In addition, the Bank has raised the issue of the environmental impact of cryptocurrency mining, which requires large amounts of energy and can contribute to climate change.
Will the UK get its Own Digital Currency?
According to the Bank of England, they are looking carefully at how a UK central bank digital currency (CBDC) might work.
But they have not yet made the decision to introduce one
Overall, the Bank of England has taken a cautious but open-minded approach to cryptocurrency. While it recognizes the potential benefits and risks of this asset class, it has not yet taken any formal action on cryptocurrency. The Bank will continue to closely monitor developments in this space and consider the implications for the financial system and the wider economy.
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