Bitcoin and other cryptocurrencies are “growing very fast” and could soon pose a risk to financial stability, Sir Jon Cunliffe has warned.
The Deputy Governor of the Bank of England said regulators are taking a closer look at the digital tokens which have boomed in popularity and price in recent years, though are hard to use as proper currencies due to their volatility and technical difficulties.
“On the question of bitcoin and other cryptoassets and their value, my judgement is that they are not at the moment a financial stability risk but they are growing very fast and they are integrating more into what you might call the traditional financial system so the point at which they might pose a risk is getting closer, and regulators and legislators need to think very hard about that,” he said.
He told BBC Radio 4’s Today Programme that the Bank is looking at setting up its own digital version of the pound – dubbed “Britcoin” – which would offer a safer alternative to either cryptocurrencies or the cash issued by commercial banks.
“Our lives are becoming more digital. As that happens, the way we use money and the money we hold changes,” he said.
“The question is whether the public at large, businesses, households, should have the option of holding the safest form of money, which is Bank of England money in their everyday lives.”
He said this is “very different” to Bitcoin.
“Bitcoin is an asset that can go up in price, it can go down in value to zero,” he said.
“We are talking about issuing something that is stable, it is safe, that people can trust, that can anchor and hold together our monetary system.”
The Bank and the Treasury are consulting on the possible uses of a central bank digital currency, which could potentially lower transaction costs and speed up payments.
However it also has the potential to undermine the financial system as there is a possibility that in a recession or financial crunch households and businesses may prefer to keep their cash risk-free at the Bank of England, pulling their funds out of commercial banks.