BANK OF ENGLAND KNOCKS DOWN USING BITCOIN AS FORM OF CURRENCY

Last updated: June 20, 2025, 10:39 | Written by: Laura Shin

The Bank of England (BoE) has consistently expressed reservations about Bitcoin's viability as a widespread form of currency, citing its inefficiency, volatility, and failure to gain traction as a mainstream financial service.While digital currencies are increasingly becoming part of the financial landscape, the BoE distinguishes sharply between decentralized cryptocurrencies like Bitcoin and the potential for a Central Bank Digital Currency (CBDC), often referred to as ""Britcoin."" Governor Andrew Bailey and other key figures within the BoE have voiced concerns about Bitcoin's inherent instability and lack of connection to tangible value, while simultaneously exploring the possibilities of a regulated, state-backed digital currency.

This exploration includes extensive research and consultation, with the BoE and HM Treasury jointly assessing the potential benefits and risks of a UK CBDC. The Bank of England s new governor gave a speech where he slammed Bitcoin, saying it had no connection at all to money. The governor, however, expressed an interest in stablecoins and a central bank digital currency (CBDC). The BoE still has a long way to go in the development of such technologies, it seems unlike China and Japan.The core idea is to provide a digital form of cash, akin to a digital banknote, backed by the stability and trust of the central bank.This stands in stark contrast to Bitcoin, which operates on a decentralized network and is subject to significant price swings. One you may have heard of is mining; this is how bitcoins are created. Bitcoin miners check for transactions on the network; this is where users send and receive bitcoins or store the digital currency. Then they work out complicated mathematical puzzles using extremely powerful computers to find out if the transactions are valid.As the financial world continues to evolve, understanding the BoE's stance on Bitcoin and its vision for the future of digital money is crucial for investors, businesses, and the general public alike.

Bitcoin's Shortcomings According to the Bank of England

The Bank of England's skepticism towards Bitcoin stems from several key issues it perceives with the cryptocurrency.These concerns are not merely theoretical; they reflect practical challenges and risks that could impact the stability of the financial system and the well-being of consumers.

Volatility and Lack of Intrinsic Value

One of the most frequently cited criticisms is Bitcoin's extreme price volatility.Unlike traditional currencies that are relatively stable due to central bank oversight and economic factors, Bitcoin's value can fluctuate dramatically in short periods.This volatility makes it unsuitable for everyday transactions and poses a significant risk for users who hold Bitcoin as a store of value.

Moreover, the BoE argues that Bitcoin lacks intrinsic value. HM Treasury (HMT) and the Bank of England (the Bank) have today announced the next steps on the exploration of a UK Central Bank Digital Currency (CBDC). CBDC would be a new form of digital money issued by the Bank of England and for use by households and businesses for their everyday payments needs.Unlike physical assets like gold or commodities, Bitcoin's value is primarily based on speculation and market sentiment.This lack of underlying value makes it vulnerable to sudden crashes and bubbles, potentially leading to significant financial losses for investors.

Inefficiency and Scalability Issues

Bitcoin's underlying technology, blockchain, while innovative, faces scalability challenges.The number of transactions that can be processed per second is limited, leading to slow transaction times and high fees, especially during periods of high demand. The United Kingdom will not become the next home of Bitcoin s currency. Bitcoin (BTC) $ 43,765.00 4.81%; Ethereum (ETH) $ 3,131.06 3.92%; Binance Coin (BNBThis inefficiency makes Bitcoin impractical for widespread use as a payment system.

The energy consumption associated with Bitcoin mining is another significant concern. When it came to the matter of the viability of Great Britain creating their own digital currency for the nation in the near future, Dr Ben Broadbent, the Deputy Governor of Monetary Policy for the Bank of England was less than enthusiastic about anything happening in the near future.The process of verifying transactions and adding new blocks to the blockchain requires substantial computing power, resulting in a large carbon footprint.This environmental impact raises questions about the sustainability of Bitcoin as a long-term solution.

Regulatory Concerns and Illicit Activities

The decentralized nature of Bitcoin makes it difficult to regulate and control. Today we can pay in many different ways, including using banknotes issued by the Bank of England or electronically, from your bank account. Whichever way you choose to pay, you can always trust the value of the money you re spending or receiving. A digital pound would be like a digital form of cash a banknote for the digital era.This lack of regulatory oversight creates opportunities for illicit activities such as money laundering, fraud, and tax evasion.The BoE is concerned that the anonymity offered by Bitcoin can be exploited by criminals and terrorists, posing a threat to national security.

Furthermore, the lack of consumer protection in the Bitcoin ecosystem raises concerns about the potential for scams and fraud.Users who lose their Bitcoin due to hacking or theft have limited recourse, as there is no central authority to provide assistance or compensation.

The Bank of England's Vision for a Central Bank Digital Currency (CBDC)

While critical of Bitcoin, the Bank of England is actively exploring the possibility of issuing its own digital currency, a CBDC.This digital pound, often referred to as ""Britcoin,"" would be fundamentally different from Bitcoin and other cryptocurrencies.It would be backed by the central bank, regulated, and designed to provide a stable and secure means of payment for households and businesses.

Key Features of a UK CBDC

The BoE envisions a UK CBDC with the following key features:

Central Bank Backing: The CBDC would be a liability of the Bank of England, providing the same level of trust and security as physical cash.
Government Regulation: A CBDC would be subject to strict regulatory oversight, ensuring consumer protection and preventing illicit activities.
Fixed Value: The value of a CBDC would be pegged to the British pound, providing stability and predictability.
Accessibility: The CBDC would be accessible to all UK residents and businesses, providing a convenient and inclusive means of payment.
Programmability: A CBDC could potentially be programmed to enable new and innovative payment solutions.

Potential Benefits of a CBDC

The Bank of England believes that a CBDC could offer several potential benefits:

Improved Payment Efficiency: A CBDC could streamline payments, reducing transaction costs and processing times.
Financial Inclusion: A CBDC could provide access to financial services for those who are currently unbanked or underbanked.
Innovation: A CBDC could foster innovation in the payments industry, leading to new and improved financial products and services.
Reduced Reliance on Cash: A CBDC could reduce the reliance on physical cash, which is costly to produce, distribute, and manage.
Competition: A CBDC could promote competition among payment providers, leading to lower prices and better service for consumers.

Challenges and Risks of a CBDC

Despite the potential benefits, the Bank of England also recognizes that a CBDC presents several challenges and risks:

Cybersecurity: A CBDC system would be vulnerable to cyberattacks, requiring robust security measures to protect against data breaches and fraud.
Privacy: A CBDC could raise privacy concerns, as the central bank would have access to data on all transactions.
Financial Stability: A CBDC could potentially disrupt the banking system, as consumers could shift their deposits from commercial banks to the central bank.
Operational Risks: A CBDC system would be complex and require significant investment in technology and infrastructure.
Monetary Policy: A CBDC could affect the implementation of monetary policy, requiring adjustments to existing tools and strategies.

The Consultation Process and Future of Digital Currency in the UK

The Bank of England and HM Treasury are actively engaged in a consultation process to explore the potential design and implementation of a UK CBDC.This process involves engaging with stakeholders from across the financial industry, technology sector, and civil society to gather feedback and address concerns.

Key Consultation Questions

The consultation process focuses on several key questions:

What are the potential benefits and risks of a UK CBDC?
What design choices should be made regarding the functionality, privacy, and security of a CBDC?
How should a CBDC be integrated with existing payment systems and financial infrastructure?
What regulatory framework should govern a CBDC?
How can a CBDC be used to promote financial inclusion and innovation?

Michael Saylor's Prediction: Bank of England to Buy Bitcoin?

Interestingly, figures like Michael Saylor have predicted that the Bank of England may eventually consider including Bitcoin in its reserves.This perspective, though not the BoE's current official stance, acknowledges the growing institutional interest in digital assets.Such a move, if it were to occur, would signal a significant shift in the perception of Bitcoin from a speculative asset to a potentially legitimate reserve currency.

Current Status and Timeline

While the Bank of England is diligently exploring the possibility of a CBDC, it is important to note that a decision to issue a digital pound has not yet been made.The consultation process is ongoing, and the BoE is carefully weighing the potential benefits and risks before committing to a course of action.

Dr. The Governor of the Bank of England says that Bitcoin is inefficient and not taking off as a financial service. Bailey said the Bank continues to monitor developments with topBen Broadbent, the Deputy Governor of Monetary Policy for the Bank of England, has indicated that the development of a UK CBDC is unlikely to happen in the near future.The BoE is taking a cautious and deliberate approach, recognizing the complexity and potential impact of such a significant undertaking.

Furthermore, the Prudential Regulation Authority (PRA), the UK's financial regulator, is actively gathering data on firms' exposure to crypto assets, emphasizing the need for companies to disclose their involvement with digital currencies.This underscores the BoE's commitment to understanding and managing the risks associated with the evolving crypto landscape.

Regulation and the Crypto Market

The evolving landscape of digital assets has pushed regulators around the globe to contemplate and implement guidelines to govern this space.The SEC boss cited in the research snippets, emphasizes that crypto platforms need regulation to survive. Michael Saylor, co-founder of Strategy, predicts that the Bank of England may soon consider including Bitcoin in its reserves. During the Bitcoin 2025 conference in Las Vegas, he stated that Bitcoin could start to gain widespread adoption among major companies as interest in digital assets grows among key institutions.Without a clear legal framework, crypto platforms face a myriad of challenges including uncertain compliance requirements, difficulty attracting institutional investors, and increased risks of fraudulent activities.

The Bank of England's Stance on Crypto Regulation

The Bank of England has been quite vocal on the necessity for comprehensive and robust regulations for the crypto market. Bitcoin is a completely digital peer-to-peer currency (Credits: Getty Images) Bitcoin is a type of cryptocurrency, which is a virtual or digital currency like an online version of cash.They stress that these regulations are not just for protecting consumers from potential scams and market manipulation, but also for ensuring the stability of the overall financial system. A central bank digital currency or CBDC meanwhile, would be a digital form of central bank money provided for retail use. New forms of digital money could be preferred by the public to commercial bank deposits, but they will be suitable only if they can be trusted as implicitly as central or commercial bank money and become an acceptedA lack of regulation in the crypto space could potentially lead to systemic risks, especially as traditional financial institutions increasingly interact with digital assets.

Comparing the UK's Approach with Other Countries

While the UK, through the Bank of England, has adopted a cautious approach to Bitcoin and other cryptocurrencies, some countries have been more receptive.For example, some nations have legalized Bitcoin as legal tender, demonstrating a greater degree of acceptance.Other countries are focusing on developing their own CBDCs, similar to the UK, but with varying degrees of progress.The UK's approach stands out for its emphasis on thorough research, public consultation, and risk assessment, ensuring that any move towards digital currencies is well-considered and aligned with the country's economic and financial goals.

Practical Implications and Actionable Advice

Understanding the Bank of England's stance on Bitcoin and its exploration of a CBDC has significant implications for individuals, businesses, and investors.

For Individuals

Be Cautious with Bitcoin Investments: Given the volatility and risks associated with Bitcoin, invest only what you can afford to lose.
Stay Informed: Keep abreast of developments in the digital currency landscape and the Bank of England's policy announcements.
Protect Your Digital Assets: Take steps to secure your Bitcoin holdings, such as using strong passwords and enabling two-factor authentication.
Understand the Risks: Be aware of the potential for scams and fraud in the Bitcoin ecosystem.

For Businesses

Assess the Potential of Digital Payments: Explore the benefits of accepting digital payments, including Bitcoin, but weigh the risks carefully.
Prepare for Regulatory Changes: Stay informed about upcoming regulations governing digital assets and ensure compliance.
Consider the Impact on Financial Operations: Evaluate how the adoption of a CBDC could affect your business's financial operations and payment processes.

For Investors

Diversify Your Portfolio: Don't put all your eggs in one basket. Central bank digital currency, or CBDC, is a potential new form of digital money issued by central banks and for use by households and businesses for their everyday payment needs. Britcoin wouldDiversify your investments across different asset classes to mitigate risk.
Conduct Thorough Research: Before investing in Bitcoin or other cryptocurrencies, conduct thorough research and understand the underlying technology and market dynamics.
Seek Professional Advice: Consult with a financial advisor before making any investment decisions.

Conclusion: A Cautious Approach to a Digital Future

The Bank of England's stance on Bitcoin is clear: it is not currently considered a viable form of currency due to its volatility, inefficiency, and regulatory challenges. It s called digital (or electronic) because it isn t physical money like notes and coins. It is in the form of an amount on a computer or similar device. The Bank of England is the UK s central bank and together with HM Treasury, we are looking closely at the idea of a central bank digital currency for the UK. If we introduced one, we dWhile the BoE acknowledges the potential of digital currencies, it believes that a centrally backed and regulated CBDC offers a more stable and secure path forward. Get the best currency exchange rates for international money transfers to 200 countries in 100 foreign currencies. Send and receive money with best forex rates.The ongoing consultation process reflects a cautious and deliberate approach, with the BoE carefully weighing the potential benefits and risks before making any firm decisions. The cost of living rose by 4.2% in October, its highest rate in almost 10 years.This surge in inflation has led analysts to predict an increase in interest rates from their current record low of 0.1%.The future of digital currency in the UK remains uncertain, but one thing is clear: the Bank of England is committed to ensuring that any digital currency solution is safe, stable, and benefits the entire economy.Bitcoin’s potential inclusion in reserves remains a fringe possibility.Staying informed about developments in this area is crucial for navigating the evolving financial landscape.