Banking on a digital currency

Abstract

Stablecoins are pegged to an underlying asset and they are inherently more stable than crypto as an asset. Another facet of stablecoins is emerging; their potential use by central banks to create a central bank digital currency (CBDC). A CBDC would integrate into existing payment systems used by financial institutions and would be relatively risk-free; backed by a central bank, like physical banknotes and coins. This article discusses Britcoin, the UK's potential CBDC. It is still in the theoretical stage of development; however, its establishment is feasible and is thus firmly on the radar of the Bank of England. The potential benefits are discussed which include the low costs, speed of transacting and promoting consumer choice. However, concerns have been raised which involve, control and programmability which can affect the privacy of an individual. Cash is non-traceable, unless there is a privacy layer introduced, the same cannot be said of a Britcoin. Stakeholders, individuals, businesses, and government have much to gain from the introduction of CBDCs but only if implemented within a strong governance structure.