City concerned over Bank of England's 'Britcoin' plans

The City of London has voiced its concerns over the Bank of England’s proposal to introduce a digital currency called ‘britcoin,’ warning that it could potentially lead to bank runs.

The International Regulatory Strategy Group (IRSG), a prominent lobby group representing the financial hub, expressed its reservations in response to a consultation conducted by the Bank and the Treasury earlier this year.

The IRSG expressed unease about the possibility of completely removing the proposed limits on holding the digital currency, stating that this development was “very concerning” in light of recent bank runs that resulted in the downfall of several US banks and the European giant, Credit Suisse.

The consultation, initiated in February, outlined plans to introduce a ‘digital pound’ that could be implemented by the second half of the decade. The proposals stipulated an initial limit of between £10,000 and £20,000 on the amount of money that individuals could hold in britcoin accounts. These accounts would not accrue interest, a measure designed to discourage customers from abandoning their existing account providers.

However, the IRSG, which is a collaboration between TheCityUK and the City of London Corporation, expressed reservations about the proposal in its response to the consultation. While the group acknowledged the potential benefits of a digital pound and supported the idea in principle, it criticised the proposed upper limit on britcoin accounts as excessively high. In comparison, the European Central Bank is considering a €3,000 ceiling for a similar initiative.

The IRSG agreed on the need for the UK to remain ambitious and embrace advancements in the digital currency space. However, it argued that a more moderate limit would be appropriate to strike a balance between consumer demand and financial stability.