The United Kingdom’s finance minister, Rishi Sunak, has recently announced that the Bank of England is looking at creating its own, central bank-backed digital currency nicknamed ‘Britcoin’. The idea came in an effort to help tackle some of the challenges presented by Bitcoin and altcoins.
“We’re launching a new task force between the Treasury and the Bank of England to coordinate exploratory work on a potential central bank digital currency (CBDC),” Sunak announce during a fintech conference.
“Our vision is for a more open, greener, and more technologically advanced financial services sector,” the minister added, “And if we can capture the extraordinary potential of technology, we’ll cement the U.K.’s position as the world’s preeminent financial center.”
Sunak’s announcement of a central bank-backed cryptocurrency was surprising to some. Earlier this year, the Financial Conduct Authority (FCA) banned the sale of crypto derivatives to retail consumers.
The FCA considers these products to be “ill-suited” for retail clients due to the “inherent nature of the underlying assets, which means they have no reliable basis for valuation.” In addition to this, cryptocurrencies have been associated with financial crimes as well as extreme volatility.
The ban is specifically oriented towards “the sale, marketing, and distribution” to retail investors; the crypto community highly criticized the ban, considering it unreasonable.
“This ban reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here,” commented interim executive director of Strategy & Competition at the FCA, Sheldon Mills, ”We have evidence of this happening on a significant scale. The ban provides an appropriate level of protection,” he added.
The ban allegedly came following the crypto exchange BitMEX and its CEO Arthur Hayes getting charged by the U.S. authorities for violating regulations.
In late 2020 the founders were fined for violating the U.S. Bank Secrecy Act and accused of conspiring to violate the law by failing to implement certain anti-money laundering measures. Initially, only Samuel Reed was arrested, but eventually, Arthur Hayes turned himself in too.
“One defendant went as far as to brag the company incorporated in a jurisdiction outside the U.S. because bribing regulators in that jurisdiction cost just ‘a coconut’,” commented a representative from the FBI, “Thanks to the diligent work of our agents, analysts, and partners with the CFTC, they will soon learn the price of their alleged crimes will not be paid with tropical fruit, but rather could result in fines, restitution, and federal prison time.”
The People’s Bank of China has been developing its own bank-back cryptocurrency, the digital yuan. Apparently, China has been working on the new coin since 2014. The country plans to implement the cryptocurrency in an effort to digitize physical money and eliminate cash since China is already very forward in its cashless payments.
“The use of cash is decreasing. Eventually, cash will be replaced by something in digital format. That is one of the big drivers behind this,
Legal disclaimer: The material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instruments. UR Trade Fix Ltd accepts no responsibility for any use that may be made of these comments and for any consequences resulting in it. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. The analysis does not involve any specific investment objectives, financial situation and needs of any specific person who may receive it. Past performance does not constitute a reliable indicator of future results and future forecasts do not constitute a reliable indicator of future performance.
It has not been prepared in accordance with legal requirements designed to promote the independence of research, and as such it is considered to be marketing communication. Although we are not specifically constrained from dealing ahead of the publication of our research, we do not seek to take advantage of it before we provide it to our clients. We aim to establish, maintain and operate effective organizational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. We operate a policy of independence, which requires our employees to act in our clients’ best interests when providing our services.