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Hassan Maishera
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Bank of England

Central bank digital currencies (CBDCs) are becoming increasingly popular globally, and the Bank of England Governor warned that they could attract money launders and cybercriminals.

CBDCs are great, but they will attract cybercriminals

The rise of cryptocurrencies and stablecoins in recent years has attracted the attention of central banks globally to the market. In addition to seeing the need to regulate the rising crypto market, central banks also believe developing CBDCs would help bring them to the digital age and bridge the gap between them and the private financial institutions.

However, despite the positives of having the digital versions of fiat currencies, the Bank of England (BOE) governor Andrew Bailey believes there are risks attached to developing and issuing the digital currencies.

Bailey, while speaking on financial innovation at the City UK annual conference yesterday, said CBDCs risk attracting cybercriminals and money launderers. He believes the digital currencies are excellent innovations and are the future of the global financial systems. However, they still come with certain risks that regulators need to find a way to tackle.

The BOE governor encouraged regulators to ensure they promote financial innovation as they would benefit the economy. However, that doesn’t mean the innovations shouldn’t be criticized or adequately regulated. He believes the new forms of digital money should be accepted as a means of payment and trusted as a store of wealth.

The BOE, like several other central banks, is considering launching the digital pound. Per the apex bank, the digital pound would be issued directly to consumers in a number of years and not via retail banks. The BOE also published a paper last week discussing the need for digital currencies. According to the paper, the BOE recommends at least 20% of all retail banking deposits should be in digital currencies once the CBDCs go live.

However, the paper said the transition to digital currencies would affect the financial markets. Hence, Bailey advised central banks to limit the speed and scale of any transition to digital currencies.

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Bailey still not a fan of cryptocurrencies

Most central bank governors are not fans of Bitcoin and other cryptos. Bailey criticized cryptocurrencies, stating that “I have met crypto enthusiasts who take the libertarian view that something backed by nothing has more confidence in value than something backed by the state. Suffice to say that is not a view I agree with.”

BTC/USD chart. Source: FXEMPIRE

Bitcoin and other cryptocurrencies have rallied over the past year, with BTC reaching a new all-time high at $65,000 earlier this year. However, BTC’s price has dipped in recent weeks, and it is now trading above $40,000.

For a look at all of today’s economic events, check out our economic calendar.

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