In a recent meeting of the United Kingdom Parliament Treasury Committee, Andrew Bailey, the Governor of the Bank of England (BOE), voiced his concerns about the efficiency of Bitcoin (BTC) as a payment method. Bailey and Sarah Breeden, the Deputy Governor of BOE, were part of this high-profile meeting to discuss the BOE’s latest Financial Stability Report.
Bitcoin’s Momentum Slowing Down
Bailey made his stance clear on Bitcoin’s viability, stating his belief that the cryptocurrency lacks momentum as a payment method due to its inefficiency. He reiterated his long-held view that Bitcoin, being an unbacked cryptocurrency, possesses no intrinsic value.
“In my opinion, it’s not gaining traction as what I would term a central financial service. For instance, the use of Bitcoin as a payments method seems quite inefficient,” Bailey said.
Regulation and Cryptocurrency
Breeden added to the discussion by highlighting the absence of a concrete regulatory framework as one of the significant roadblocks slowing the progress of cryptocurrency in traditional finance. However, she did acknowledge the changing landscape in this regard.
Stablecoins: A Challenge for Regulators
Bailey also expressed his concerns about stablecoins, stating that these present their own set of challenges for regulators. He criticized them for not being stable enough and for their “opaque” nature.
Central Bank Digital Currency (CBDC)
The meeting also briefly touched upon the topic of Central Bank Digital Currency (CBDC) — or “Britcoin,” as it was referred to during the discussion. Breeden mentioned that debates are ongoing on various issues concerning CBDCs, including privacy and programmability.
“Bank of England Governor Andrew Bailey says the integration of cryptocurrencies into the global financial system has stalled,” as reported by Bloomberg Markets on January 10, 2024.
The December Report
The December report, which was the focus of the meeting, devoted minimal attention to digital currencies. The report suggested that authorities are contemplating policy choices for stablecoins and CBDC. It also discussed how to mitigate financial stability risks that could arise from a higher proportion of deposits being withdrawn from the banking system under stress.
The report mainly reviewed previous findings and recommendations, stating, “The FSB will conduct a review of the implementation of its recommendations by end-2025.” The UK regulators have been working on stablecoin rules for much of 2023, with stablecoin regulations expected to come into force in the U.K. in 2025.
From the above discussion, it can be inferred that the Bank of England is wary of the potential risks and challenges associated with cryptocurrencies, particularly Bitcoin. It remains to be seen how these views will shape the future of digital currencies and their regulation in the UK.
