Bank of England: Current Cryptocurrencies are Unlikely to Last

The current frenzy in the crypto sphere has instigated arguments surrounding bitcoin’s capacity to replace fiat currency, and notable individuals in the conventional banking sector have recently expressed their opinions on the subject.

Central Bank executives Weigh in on the Future of Crypto

About two weeks ago, the president of the European Central Bank, Christine Lagarde, called for the regulation of bitcoin, claiming that the digital asset is being used to facilitate money laundering activities. Today, Andrew Bailey, the Bank of England governor, has rebuffed all suggestions and opinions that bitcoin could replace fiat currencies.

“Have we landed on what I would call the design, governance, and arrangements for what I might call a lasting digital currency? No, I don’t think we’re there yet, honestly. I don’t think cryptocurrencies as originally formulated are it,” he said in a virtual meeting organized by the World Economic Forum.

“The whole question of people having assurance that their payments will be made in something with stable value ultimately links back to what we call fiat currency, which has a link to the state.” He further elaborated.

Bailey’s comments are reminiscent of an American publisher, Steve Forbes, who outrightly downplayed the chance of cryptocurrencies replacing fiat. He opined that bitcoin’s fixed supply will limit its ability to cater to a growing economy. According to him, cryptocurrencies will only pose a serious threat to the dollar if they possess a fixed value.

“Another problem with bitcoin is that its supply is fixed. Its amount cannot be increased. By contrast, the supply of money must be able to expand to meet the growing needs of a growing economy.” He said.

Central Banks Proffer Solution

As an alternative to volatile cryptocurrencies like bitcoin, central banks are considering the creation of a fiat-backed CBDC (Central bank digital currency) that possesses a stable value and can be regulated by the issuing central bank or government.

This initiative which was pioneered by the Bank of England (BOE), has caught the interest of top central banks around the world. Bailey believes that these CBDCs will tick the three boxes that are unchecked by cryptocurrencies. They are: value stability, privacy preservation, and the ability to tackle financial crime.

Just yesterday, CryptoPotato reported that China is to give away another $4.6 million in digital yuan, furthering its CBDC trials. The country is so far in the lead when it comes to piloting a central bank digital currency and has even engaged large local companies in its trials.