The Bank of England (BoE) has made substantial progress with its central bank digital currency (CBDC) program. Tom Mutton, director of fintech at the Bank of England, recently discussed the privacy aspect of the CBDC and why the central bank might consider alternatives to blockchain as the underlying technology.
In the interview, Mutton stated that during a recent meeting of technologists hosted by the BoE to debate the design of the digital pound, there was a clear disagreement regarding which ledger should be used for the CBDC. Therefore, the bank intends to test a variety of ledger technologies, including blockchain.
BoE CBDC Chief prioritizes privacy for the Digital Pound
The development plans for a digital pound, dubbed Britcoin, were first proposed in April 2021, when the United Kingdom’s Treasury Department and Bank of England created a joint task force to study a U.K. CBDC. Later, in February 2023, the bank released a consultation paper describing the design of the digital pound.
According to reports, BoE and His Majesty’s Treasury are at this point seeking feedback from stakeholders and technology experts on the CBDC’s proposed design. The deadline for remarks is June 30. Mutton stated:
We want to be compatible with distributed-ledger business models in the private sector, but we were not convinced that distributed ledgers offered more efficiency over conventional ledgers.
Tom Mutton
Mutton also discussed the privacy aspect of the CBDC, asserting that it would be centered on providing users with privacy and would not collect personal information. He stated that the bank would be responsible for supplying the infrastructure, while the private sector would be in charge of innovation. Here is what he said:
There will be no data shared with the Bank of England [BoE], we will know what transactions have happened but we will have no data on the individual who did it. While the wallet provider would have the user data but won’t have access to their transaction data.
Tom Mutton
Mutton stated that neither the BoE nor the English government would have access to any user data. In addition, even wallet providers with limited access to that data would need user permission to store certain data. With a concentration on retail, the BoE had previously stated that the digital pound and private stablecoins could coexist.
Europe grapples with the possibility of MiCA 2.0
On Thursday, the European Union’s innovative new crypto regulations will go into effect, marking the end of two and a half years of legislative work. But financial policymakers are already advocating for the introduction of a second version of the law in the future.
Markets in Crypto Assets (MiCA) was published in the EU’s official journal on June 9 and is set to go into effect on June 29, putting firms on the clock to comply with its requirements before they are enforced. Certain stablecoin regulations will be implemented in one year, while the remainder will be implemented by the end of 2024.
Bank of France Governor Francois Villeroy de Galhau stated last week at an event in Paris that legislators must now develop “MiCA II” in order to better regulate the crypto industry, even as firms play catch-up with the new regime. His remarks paralleled those of Chrisine Lagarde, the president of the European Central Bank, who has repeatedly called for a MiCA mark 2.0 to address current blind spots such as decentralized finance (DeFi), lending, and staking.
After 18 months, the Commission will be required to produce reports on some of the current legislative gaps. In addition to DeFi, lending, and staking, this could also encompass non-fungible tokens (NFTs), which were left out of the original version of MiCA.
Although the actual implementation of a second MiCA may be years away, this has not stopped the industry from discussing what should be included if the legislation is revised.
An analyst remarked that it is possible to have too much of a positive thing, particularly as regulators attempt to respond to multiple fronts of new technology. Europe has taken center stage in crypto regulation that could see the region create either a good or really bad environment for crypto to thrive.
