Bank of England (BOE) Governor Andrew Bailey has described El Salvador’s decision to adopt Bitcoin as a legal national currency as a concern for consumers in view of its volatility.
Bank of England and the choice of Bitcoin in El Salvador
During an appearance at the University of Cambridge Students’ Union yesterday, Andrew Bailey, Governor of the Bank of England (BOE) shared his thoughts on El Salvador’s choice to adopt BTC as legal tender.
“It concerns me that a country would choose it as its national currency. What would worry me most of all is, do the citizens of El Salvador understand the nature and volatility of the currency they have”.
Bailey’s concern is about the awareness of citizens and consumers when using BTC, which is more volatile than fiat currency.
Not only that, Bailey adds that even the International Monetary Fund, which monitors the risks to global financial markets, is not happy with El Salvador’s actions.
And, in fact, the IMF is reported to have stated that the uncertainty surrounding the issuance of sovereign bonds to buy Bitcoin and finance infrastructure investments is very high, considering that there is no absolute certainty that BTC will grow.
Basically, according to the IMF, Bitcoin should not be used as legal tender at all.
Bank of England and the stability of digital currencies
The BOE is studying the possibility of creating its own digital currency system to facilitate online payments and give consumers a secure way to hold cash that keeps up with technology.
Bailey went on to clarify his position on the “stability of digital currencies,” stating the following:
“There is a strong case for digital currencies, but in our view it has to be stable, particularly if it’s being used for payments. That is not true for crypto assets”.
It is since last September that Bailey has reportedly confirmed the idea that the Bank of England is studying the possibility of issuing its own Central Bank Digital Currency (CBDC), but from his statements, decentralization and blockchain are discarded.
Indeed, this would be a replacement of physical sterling with digital sterling, so that the “stability” of its price is in line with its mission of utility for payments.
The progress of the British CBDC
Last month, the Digital Pound Foundation was established in the UK to support the creation of the UK CBDC.
This is an independent organization, formed by a group of private sector professionals, founded specifically for the digital pound.
The aim of the Digital Pound Foundation will be to undertake research, advocacy, hands-on exploratory projects and multi-stakeholder collaboration in the design, development, implementation and dissemination of the Digital Pound.