The Bank of England has dropped plans to launch its own digital currency amid concerns about its impact on the financial system.
The U.K.’s central bank told FTAdviser that it has “no current plans” to launch its own cryptocurrency, but will continue to research the topic.
The announcement comes just days after the central bank had said that one of its research unit is investigating the introduction of a cryptocurrency linked to pounds sterling. The research team was expected to report back within the next 12 months.
The BoE indicated it dropped the plans over concerns that the public might stop using commercial bank accounts and move on to BoE’s digital payments system for transactions and purchase of goods. A mass move to the BoE cryptocurrency might lead to commercial banks running out of cash to lend, causing “turbulence” in the economy, it said.
The BoE also suggested that the demand for paper money is “elastic” and can be controlled with interest rate changes. However, it is unsure whether this would continue with the growth of digital currencies, which could potentially weaken its power to use interest rates to manage financial stability.
The central bank recently restated, however, that cryptocurrencies like bitcoin do not pose a threat to global financial stability. The bank’s head, Mark Carney, said last month that the digital currency’s recent meteoric price gains are “significant” and more like an “equity-type risk.”
Bank of England image via Shutterstock