UK treasury and Bank of England consider a cryptocurrency reserve

The country is expected to take a leading role regarding the use of digital currencies

The UK treasury is working with the Bank of England to explore the possibility of creating a national central reserve of cryptocurrencies.

The economic secretary to the Treasury, John Glen, said that the government is confident that the country will take “a leading role in exploring central bank digital currencies, and the wide-ranging opportunities and challenges they could bring.”

In line with the budget earlier this year, the Bank of England published a paper on the subject and called for public opinion regarding the document.

The consultation has since closed and the central bank will now begin discussions with the government to assess whether and how to proceed with the idea of implementing a cryptocurrency reserve.

To answer a written parliamentary question from fellow Conservative MP, Mark Pritchard, Glen revealed that “the HM Treasury and the Bank of England are now working together to consider next steps.”

The UK Government is the most recent to join a steadily growing list of countries considering investing in the development of a central bank digital currency (CBDC). Other countries that are looking into the creation of their own CBDCs include Sweden, Canada, South Korea, the US and China.

While a digital dollar from the US is estimated to take five more years of development, China’s digital yuan is already undergoing a soft launch in four cities.

The Bank of International Settlements (BIS), an international financial institution owned by member central banks, recently came out firmly in favour of CBDCs in a new report. The BIS, which is collectively owned by 62 central banks, believes that CBDCs may be capable of triggering a “sea change,” which would provide households and businesses around the world with new, safe and efficient payment options.

The BIS believes that apart from helping central banks work with financial inclusion, better payment methods, and increased innovation, could also be an alternative to remittances. Remittances often incur heavy fees, ranging to as high as five to ten percent, in “regions with fewer channels” such as Africa. Apart from making transactions faster, transparent, and more efficient, migrant workers from developing countries would pay less fees to remit back to their families.

The BIS notes that the issuance of CBDCs needs to be approached thoughtfully, highlighting that it is “not so much a reaction to cryptocurrencies and private sector ‘stablecoin’ proposals, but rather a focused technological effort by central banks to pursue several public policy objectives at once.”