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BoE advisor: Britcoin et al competition would be ‘positive’

By Daniela Ešnerová


Updated

Carolyn Wilkins head shot
Carolyn Wilkins made her case for BoE-backed digital currency – Photo: Bank of England

A Bank of England-backed digital currency competing with bank deposits would be “positive”, said Carolyn Wilkins, an external member of the Bank of England's Financial Policy Committee. Wilkins gave the keynote address during the annual meeting of the Autorité des marchés financiers.

“I think increased contestability for deposits would be positive, and the central bank digital currencies (CBDC) could be designed to avoid any instability in bank funding,” Wilkins said speaking on the BoE's potential CBDC, which earned nickname “Britcoin” by the media.

The Bank of England is one of more than 50 central banks that are researching and experimenting with their own digital version of cash.

BoE-backed currency would be “a new form of digital money issued by the BoE and for use by households and businesses for their everyday payments needs. It would exist alongside cash and bank deposits, rather than replacing them,” the central bank said. The BoE is set to launch consultation with Her Majesty Treasury on the topic next year, following formation of a task force examining the topic in April 2021.

‘No decision’ on Britcoin

“No decision has been made on whether to introduce a CBDC in the UK, which would be a major national infrastructure project,” the bank said earlier this month.

Speaking today, Wilkins said: “No decision has been taken yet in most jurisdictions, including Canada and the UK. Much of the public discourse so far has focussed on winners and losers if this were to happen.

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“One particular concern is that a CBDC would compete too successfully with bank deposits, and potentially raise the cost and undermine the stability of this source of bank funding. I think increased contestability for deposits would be positive, and the CDBC could be designed to avoid any instability in bank funding.”

Wilkins said her views are “her own and do not necessarily reflect those of the Bank of England or any of its policy committees.”

Wilkins is an economist and a former Bank of Canada Deputy Governor.

The Autorité des marchés financiers is the body mandated by the Québec government to regulate Québec’s financial markets and assist consumers of financial products and services.

Read more: Bank of England to consider the case for a ‘Britcoin’

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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