The majority of developed countries across the globe have begun granting greater interest in the cryptocurrency industry. Several central banks have actively started the process of developing a government-controlled virtual currency.
The Central Bank of England’s opinion on tokenization in general
England has join the ranks of these countries some time ago. In a speech he gave, Deputy Governor of the Bank of England, Sir Jon Cunliffe, paid attention particular on stablecoins, CBDCs and other forms of tokenization taking hold in the modern economy.
Innovative Finance Global Summit is the name of a conference that brings together the major players in the world of finance for a working session and knowledge sharing.
It was during this meeting, held in London on April 17, that Sir Jon Cunliffe, Deputy Governor of the Bank of England, spoke about the development of tokenization.
The @bankofengland‘s Jon Cunliffe outlines 4 areas where tokenisation of money is being explored: #stablecoins for payments, tokenisation of commercial bank deposits, issuance of a digital pound, and ensuring these new forms of money are robust & uniformhttps://t.co/DthyJrtVZ1
— Central Bank Payments News (@cbpaymentsnews) April 17, 2023
Several media had already reported in the past that the UK central bank had started to study the principle of tokenization bank currencies, non-bank currencies and currencies issued by the central bank. It also analyzes the ways in which tokenized assets could interact with each other.
For Cunliffe, stablecoins represent an ingenious idea, because they offer the possibility of greater efficiency and better functionality in payment methods.
However, he also pointed out that current technology as well as existing stablecoin models are not unable to meet standards robustness and uniformity that apply today to bank currencies as well as to existing payment systems.
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Towards a progressive tokenization of the finance industry?
To meet growing digital needs, Cunliffe says central bank experts have planned to work with UK regulator, the Financial Conduct Authority (FCA) on the best way to regulate this part of the finance industry. The operation will take place after the adoption of the draft law on financial services and markets.
During his speech, he proposed an alternative that seems much simpler than stablecoins : tokenized bank deposits. According to him, this is a less complex proposal than the stablecoins which has the potential to allow bank deposits to better compete with non-bank payment methods.
Of course, he also noted that the implementation of such a measure will raise regulatory issues related to deposit insurance as well as anti-money laundering measures.
These measures are to be taken into account particularly, because deposits in tokens would be settled without the intervention of the currency issued by the central bank, contrary to the current regulations of commercial banks.
The future of finance in England
He then went on to explain that a digital currency issued by the British central bank will eventually become inevitable. Even more so if current payment and currency trends continue.
A digital pound could thus play an anchoring role in the economy, like cash does today. It would allow a wide range of innovators to access a broader platform.
To increase financial stability, machines could be created to ensure that tokenized transactions can be settled in central bank money through a digital pound.
This intervention by the Deputy Governor of the Bank of England comes days after the US Federal Reserve announced the creation of FedNow, and new instant payment system.
Source : Cointelegraph
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