Does Britain’s digital central bank currency (MNBC) threaten local banks? This seems to emerge from a publication by the organization UK Finance, which calls on the government to revise downwards the maximum balance held by individuals. This again shows that banks fear being left out of global MNBCs.
British banks fear a panic movement linked to the future MNBC
The UK Finance organization brings together more than 300 banking and financial players in the United Kingdom. She has just published a report on the future British digital book, the development of which has been initiated by the government. The Bank of England is considering limiting the holding of MNBC to 10,000 GBP per person, or approximately 11,600 euros at the current rate, or even 20,000 GBP. But for the commercial banks, it is still too high: these indeed wish to lower this ceiling to 5,000 pounds.
According to the Times, banking institutions fear that the MNBC contributes to bank panic situations, and capital flight. In the event of a contagion of “bank runs”, such as those we saw at the start of the year, customers could thus massively withdraw their assets from banks to transform them into MNBCs, deemed to be safer. This would then create a ripple effect conducive to bank failures.
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An admission of powerlessness for the banks?
This risk, which has been highlighted by other banks around the world, shows the uncomfortable position of banks regarding MNBCs. These are indeed private players, who offer services related to the fiduciary currency of the territory where they operate. In this sense, the government can do whatever it wants with its currency: it can in theory completely exclude the banking sector from its MNBC project.
All over the world, banks have therefore launched calls to take part in these projects, and position themselves for the distribution of these new digital currencies. MNBCs indeed show the gap that still exists between private banking institutions and the state as the issuer of an official currency.
It also emphasizes the gradual transformation of the financial sector, which has changed over the years to rely more and more on non-banking players, and on new technologies such as the blockchain. The coming years should therefore define what the new equilibrium will be when it comes to central bank digital currencies.
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Source: The Times
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Journalist at Cryptoast, I fell into the pot of cryptocurrencies a few years ago. I am passionate about the innovative technologies that stem from the blockchain and I like to find the most crispy information to share with you.
Marine Debelloir
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