The Bank of England abandoned plans to create its own digital currency due to concerns over its impact on the financial system.
The Central Bank are integrated Kingdom, told FTAdviser that he had no plans to launch its own cryptocurrency, but he will continue research on this topic.
The announcement came a few days after the Central Bank announced that one of its research units will investigate the possibilities to introduce cryptocurrency-based pound. It is expected that the study will end in about 12 months.
The Bank of England said that he refused from its plans because of concerns that the public may cease to use the commercial banks and move to a digital payment system of the National Bank. A massive shift to cryptocurrency system can lead to the fact that commercial banks will cease to have sufficient cash for lending, which will cause “turbulence” in the economy.
The Bank of England also suggested that the demand for paper money is “elastic” and can be monitored by changes in interest rates. However, it is not certain that this situation will continue after the transition to digital currency that can potentially weaken its ability to use interest rates to manage financial stability.
The Central Bank recently confirmed that cryptocurrencies, such as bitcoin do not pose a threat to global financial stability.