Is the UK’s central bank digital currency (CBDC) threatening local banks? That seems to be the conclusion of a publication by UK Finance, which calls on the government to lower the maximum balance held by individuals. This shows once again that banks fear being left out of global MNBCs.
UK banks fear panic over future MNBCs
The UK Finance organization brings together over 300 of the UK’s banking and financial players. It has just published a report on the future British digital pound, the development of which has been set in motion by the government. The Bank of England is considering limiting MNBC holdings to GBP 10,000 per person, or around €11,600 at current rates, or even GBP 20,000. But for commercial banks, this is still too high. would like to lower this ceiling to 5,000 pounds..
According to the Times, banking institutions fear that MNBC could contribute to banking panicsand capital flight. In the event of a contagion of « bank runs », such as those seen at the beginning of the year, customers could massively withdraw their assets from banks to transform them into MNBCs, deemed safer. This would create a ripple effect conducive to bank failures.
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An admission of impotence for the banks?
This risk, which has been highlighted by other banks around the world, shows the uncomfortable position of banks with regard to MNBCs. These are private players, offering services linked to the fiat currency of the territory in which they operate. In this sense, the government can do whatever it wishes with its currency: in theory, it can completely exclude the banking sector from its MNBC project.
All over the world, banks have been calling for their involvement in these projects, and position themselves to distribute these new digital currencies. MNBCs demonstrate the gap that still exists between private banking institutions and the state as issuer of an official currency.
It also highlights the gradual transformation of the financial sectorwhich has changed over the years to rely increasingly on non-bank players, and on new technologies such as blockchain. The coming years should therefore define what the new balance will be as far as central bank digital currencies are concerned.
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Source: The Times
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As a journalist at Cryptoast, I fell into the cryptocurrency world a few years ago. I’m passionate about the innovative technologies stemming from blockchain, and I love digging up the juiciest news to share with you.
Marine Debelloir
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