Bank of England criticizes Bitcoin and touts potential CBDC would not be energy inefficient

  • The Bank of England is currently continuing its research on developing a central bank digital currency.
  • The central bank’s director of fintech stated that it had not decided on whether a CBDC is needed.
  • If a CBDC were to be created by the bank, the underlying technology would differ from Bitcoin, given its “energy inefficiency.”

The United Kingdom’s central bank has highlighted the drawback of the energy inefficiency of Bitcoin and said that its central bank digital currency (CBDC) would not share the same disadvantage.

Bank of England remains optimistic about blockchain technology

The Bank of England criticized Bitcoin for its energy usage while highlighting that a central bank digital currency would play a role in the country’s transition to a net-zero economy. Tom Mutton, the fintech director of the Bank of England, said:

“Bitcoin, given its performance shortcomings and energy inefficiency, is in no way a relevant comparison for the sort of technology we might use in a central bank digital currency.”

According to the central bank’s fintech director, the underlying technology behind CBDCs could be “tens of thousands of times more efficient per transaction” than the leading cryptocurrency.

Mutton’s speech at the Future of FinTech Conference reiterated the bank’s interest in developing a CBDC while keeping fiat “available for as long as people wish to use it.” 

The fintech director stated that a British CBDC would require a great deal more work before its launch, and Mutton remains optimistic about the potential role of blockchain for its digital pound. 

He further urged citizens in the United Kingdom not to “throw the blockchain baby out with the Bitcoin bathwater.”

The director emphasized the differences between stablecoins and a CBDC, saying that the Bank of England-backed CBDC would be the safest type of money available.

He further compared existing private stablecoins and other forms of private money, stating:

“The ability to convert, on-demand, ‘private’ money – such as a bank deposit, into ‘public’ money, issued by the central bank, in the form of cash, is a foundation of that confidence. It also promotes the understanding that different types of money are uniform and makes them substitutable.”

Although Mutton has not confirmed that the Bank of England would be issuing a CBDC, he added that the responses to the discussion paper on central bank digital currencies were favorable to a cautious approach. He concluded that there was near-universal agreement on further research needed before finalizing a decision. 

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