The place of cryptocurrencies in the financial system is at the heart of the debates. Many analysts are interested in this subject and give their opinions without circumlocution. Bank of England Governor Andrew Bailey also recently shared his perception of cryptocurrencies and their role in the financial system. And, the British framework has once again shown itself to be hostile to cryptocurrencies.
The flaws of cryptocurrencies according to the governor of the BoE
Cryptocurrencies are clearly not popular with Bank of England executives. Last May, a BoE official denounced the disadvantages of cryptos and extolled the merits of CBDCs. This time, it was the governor of the British central bank who spoke against these digital assets.
During his speech at the financial and professional services dinner on July 10, Andrew Bailey said that bitcoin (BTC) and all other altcoins cannot be recognized as currencies. Rather, the framework views these digital assets as “extremely speculative investments.” According to him, cryptocurrencies do not respect the two foundations of a secure currency: uniqueness and settlement finality.
The Governor of the BoE asserts that “wherever we hold our money (in bank accounts, notes and coins, etc.), we can be assured that it has the same value. (…) In other words, money is exchangeable at its face value”. Regarding finality of purchase, Andrew Bailey states that “when we pay for something, we can be sure that it has actually been paid for”.
The ideal digital currency according to Andrew Bailey
If cryptocurrencies don’t qualify as currencies, Bailey thinks an “enhanced” digital currency is ideal for the future of finance. And, this could be a central bank digital currency.
Andrew Bailey says: “Our main motivation for a retail CBDC would be to promote the single currency by ensuring that the public always has the option of accessing fully functional central bank money that can be used in his daily life”. According to the BoE governor, the enhanced digital currency must be based on internet systems capable of processing executable actions like smart contracts.
The Governor of the Bank of England is known for his aversion to cryptocurrencies. Andrew Bailey indeed considers cryptos as dangerous digital assets and is wary of them.
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