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Bitcoin too inefficient to use, Bank of England tells parliament

  • February 1, 2024
  • 3 min read
Bitcoin too inefficient to use, Bank of England tells parliament

Bitcoin is “not taking off” and losing momentum due to its inefficiency. That’s what Bank of England (BOE) Governor Andrew Bailey told the Parliamentary Treasury Committee. Bailey and the Bank of England, Deputy Governor, Sarah Breeden, appeared in front of the committee as they discussed the BOE’s latest Financial Stability Report.

“My own sense is that it’s not taking off as what I might call a core financial service,” said Bailey. “For instance, using Bitcoin as a payment method is pretty inefficient.” He reasserted his point that unbacked cryptocurrencies had no intrinsic value. Breeden added that a lack of regulatory framework hinders the progress of cryptocurrencies in traditional finance but added that the situation was changing.

Stablecoins presented challenges to regulators and were not stable enough, Bailey added, describing them as “opaque.”

Despite the government’s aspirations to be an innovation leader in this space, the nation has faced setbacks in that goal. Strict tests imposed by the Financial Conduct Authority (FCA) that requires investors to demonstrate awareness of any risks with digital asset investing. Anyone who fails the test could be barred from buying cryptocurrencies.  This has been criticised as an example of overreach by the authority.

Another barrier to mass adoption of cryptocurrencies is what has been described as a hostile banking landscape. As many as half of British banks do not support digital asset transactions. Many of them cite inadequate security checks from crypto exchanges as among the reasons for this.

While Bailey’s statement about cryptocurrencies having little momentum may be up for debate, there are many who say that the UK government is not doing enough to help support the growth of the cryptocurrency industry.

A report from CryptoUK, the self-regulatory trade association for the industry, highlighted a “concerning lack of knowledge” among MPs. Released in December 2023, it analysed sentiments of MPs and mentions of crypto and blockchain between 2022 and 2023, finding that just 5.7% of the 650 MPs had publicly spoken about it.

This suggests a limited engagement with cryptocurrencies and blockchain among MPs as only 37 are found to have specifically mentioned it in that timeframe. Industry advocates consider this a matter of concern. It does however highlight some notable voices within Parliament who have shown interest as well as support including MP Andrew Griffith, a former Economic Secretary, and Lisa Cameron, a well-known crypto proponent.

A CryptoUK spokesperson emphasised a need for MPs from all parties and regions to have a better understanding of cryptocurrencies and the industry, highlighting that as many as five million people in the UK are exposed to crypto assets and tens of thousands are working in the industry.

Under Sunak, the UK government aims to turn the country into a major crypto hub. It is also taking steps to ensure that there is a regulatory framework as FCA officials have been imposing restrictions on crypto firms promoting projects to UK residents.

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