'Britcoin': Why Are Brits Suspicious About the BoJo Cabinet's Digital Currency Research?
Despite Chancellor of the Exchequer Rishi Sunak's attempt to dispel suspicions over the government's alleged plan to replace cash with a digital pound in the future, fears associated with the potential introduction of a new CBCD persist. What's behind Britons' concerns about the much-discussed Britcoin?
On 24 July, the Daily Mail broke that Chancellor of the Exchequer Rishi Sunak is up to nothing short of a "Britcoin revolution", seeking to rival cash in the "biggest upheaval in the monetary system for centuries".
Citing Treasury insiders, the media outlet suggested that the Bank of England would establish a direct digital equivalent to physical money in a bid to boost the British economy. On the one hand, it would make it far easier to issue so-called "helicopter" money to inject into people's pockets in times of crisis; on the other hand, it would dramatically reduce banking costs and the time it takes to make online payments and transfer money around the banking system.
The idea to introduce a central bank digital currency (CBDC) in the UK popped up in April 2021, when Sunak announced the creation of a joint task force to explore the possibility of launching a new "Britcoin".
"The UK is already known for being at the forefront of innovation, but we need to go further," Sunak said in an official statement on 19 April. "If we can capture the extraordinary potential of technology, we’ll cement the UK’s position as the world’s pre-eminent financial centre."
However, the prospect of a monetary system "upheaval" and replacement of sterling with a digital equivalent prompted a heated debate and concerns among British observers.
They argued that lots of Britons remain reliant on cash; that digital technology has its obvious flaws and weaknesses, being not bulletproof to fraud. What's more, according
to some estimates, central banks' directed "money drops" with digital currencies could further boost COVID-related inflation over the next few years. Some observers fear
that it could also increase the government's control over the people's financial transactions and individual spending data.
Last Sunday, British columnist Ross Clark called for not "fall[ing] for Rishi Sunak's Britcoin" in his op-ed for the Spectator: "It is not hard to see how it could be yet one more devious scheme to abolish cash — something the Cameron government seriously considered doing — and so give the Bank of England the ability to impose negative interest rates," the journalist wrote.
According to Clark, central banks "would love to set negative rates at the moment — in order to stimulate shattered economies and to cut their own interest bills."
He noted the government's borrowing figures released last week indicated that over 10 percent of the money it spent in June went on debt interest. All in all, the Johnson cabinet spent a record £8.7 billion in interest on repaying its debts last month which is more than three times as much as the £2.7 billion in interest payments seen in June 2020, according
"Negative interest rate would turn that around and reward the government for borrowing — while simultaneously eroding (some might say stealing) the savings of ordinary people," warned Clark. "There are certain security issues with this course of action, but then if we had a series of bank runs and collapses, the mattress would be the safest place for our money."
However, if Britons were forced to keep their money in form of Britcoin, it would have been much easier for the government to impose negative interest rates, the journalist insisted, suggesting that the potential British CBDC is part of the scheme designed to "eliminate the need for the government ever to balance its books."
Sunak tried to calm Brits down in his Monday lengthy Linkedin post by assuring that "any potential UK CBDC would exist as a complement to cash and bank deposits, and not a replacement" and adding that the decision of introducing Britcoin in the country has not been made yet.
However, some observers have remained unconvinced, referring to the emerging global trend of switching to CBDCs and suggesting that the UK is likely to follow suit.
Indeed, China has already made 10 million people eligible to participate in its bold digital yuan trial project
. In mid-July, the Governing Council of the European Central Bank (ECB) kicked off the investigation phase of a digital euro project, which was seen by Forbes as "a significant step that could lead to the issuance of a central bank digital currency (CBDC) in the Eurozone". Even the US, which had beeen reluctant regarding the idea
under President Donald Trump and Treasury Secretary Steven Mnuchin, is now studying the possibility of introducing a digital dollar. During a June hearing in the US Congress, Democratic and some Republican senators spoke in favour of the plan, while the strongest opposition to a virtual dollar still comes from US banks, according