Analyst to FXMAG.COM: Bailey does not consider crypto as money as it does not fulfill its function as a means of payment since...
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On FXMAG.COM request, Ali Daylami from BITMarkets summarizes and comments on Bank of England Governor Andrew Bailey's speech:
It was quite the inclusive speech delivered by BoE Governor Andrew Bailey, who not only addressed the country’s outlook on central bank digital currencies but also their potential utility and feasibility in the nation in contrast to omnipresent challenges of the domestic banking and finance realms.
Nation’s banks remain highly capitalized and liquid
He highlighted that the nation’s banks remain highly capitalized and liquid, and that their key role in serving customers and supporting the economy prevails despite headwinds. In my opinion, this is truer than not. The United States banking sector was the one which took the hardest hit, and the damages rippled here and there across other regions.
To address digital currencies, he does not consider crypto as money as it does not fulfill its function as a means of payment since it does not possess assured stability of value, including stablecoins. This is where I would disagree.
Value stems from certain demand levels and finite supply, and this applies to both fiat and cryptocurrencies. The value of a certain fiat currency, which can be backed by reserves, is universally-agreed, and therefore, while cryptocurrencies do have an inherent risk, I argue that the value of stablecoins like USDT is assured as they are pegged to universally-recognized assets.
Our research indicates that nearly 8% of the whole population of the United Kingdom hold or trade cryptocurrency
Quoting Bailey’s “there is no free lunch” statement, the introduction of CBDCs can benefit both the BoE and the people of the nation, but the extent of the benefit for either side of the spectrum would depend on the framework put in place and the approach adopted with regards to the accessibility and utility of such currency.
I agree with Bailey that financial stability requires robust structures for financial stability policymaking, and given the growing popularity of cryptocurrency use in the nation, I envisage increasing demand for digital money in the United Kingdom.
Our research indicates that nearly 8% of the whole population of the United Kingdom hold or trade cryptocurrency, especially the renowned Bitcoin, Ethereum, Ripple and Tether. We are witnessing a rise in altcoin and NFT purchases as well, and I believe the stage is set for CBDCs to set foot in the crypto-friendly nation.
