The Bank of England has cleared the path for the introduction of digital assets as an equal player in the economy. It has begun the process to provide Bank of England accounts to Non-banking institutions that will include cryptocurrencies. The statements were made by Mark Carney, Governor of the Bank of England when speaking about the “usefulness” of the cryptocurrency technology.
The Bank of England recently provided cautious encouragement to the different digital assets from non-traditional sources. This announcement was made after the public notification on Libra cryptocurrency made by Facebook. The governor, Mark Carney, believes that the new digital assets like cryptocurrency can make a positive impact on the economy, especially for small and medium business.
Mark Carney conditionally blessed the possibility of cryptocurrencies as a valid exchange in the future for all businesses. The central bank will consider the different options that will enable digital companies to access its payment system, including the option of keeping funds at the bank overnight.
The governor made these comments in his last speech at the annual Mansion House dinner. Taking the example of Facebook’s Libra, he predicted tough regulations on the currency as a backlash from the existing financial institutions, some of whom are considering their own cryptocurrency token systems.
The move will enable small and medium companies to sever ties to the High Street Banks and provide financial services to its customers at a discounted rate with the use of cryptocurrencies. This is part of the recent move by the Governor of the Central Bank of England to modernise the institution before his term ends in January 2020.
This announcement came on the heels of a controversial meeting between Mark Carney and Mark Zuckerberg behind closed doors. The details of the meeting are yet to be released.
The move will help small and medium businesses circumvent the difficult process of fund generation and loans from the mainstream financial institutions. According to a report, these companies lost out on 22 billion pounds of funding due to the tedious and long drawn out bureaucratic procedures that overwhelm them.
“The very nature of commerce is changing. Last year one fifth of all sales in the UK were online. Next year it will be one quarter. Over the past decade the proportion of total payments made in cash has declined from two thirds to one quarter.”
MARK CARNEY, GOVERNOR, BANK OF ENGLAND
The move to keep an open mind towards digital assets is not an invitation for a free reign of cryptocurrencies. The Governor spoke of the requirement for regulations that made sure that the introduction of cryptocurrencies would not disrupt the economy. He iterated the fact that there is a significant amount of work remaining before cryptocurrencies become mainstream. The Bank made a mention of the social media revolution that was not regulated correctly by governments leading to misuse, and stressed that the same will not be the case for cryptocurrencies.
The Bank of England will not be setting up its own digital currency but will rather stick to regulating private sector cryptocurrencies introduced in the market.