Britain has been praised by some in the digital currency community for its comparatively light touch approach to regulation compared to the US. But global bank Citi is now recommending the UK government get much more involved — by creating its own digital currency.
CoinDesk has got their hands on a document submitted by Citi to the British government about the risks and possibilities of bitcoin and the digital currency space more generally.
It was submitted in response to a government consultation, and the bitcoin news service got hold of it via a Freedom of Information request.
In it, the bank is candid about the potential risks of bitcoin — but says digital currencies have a great deal of potential.
Citi warns that if governments don’t act, they could find themselves on the wrong side of history:
We believe that Governments and the Financial Industry incumbents are not currently leveraging the benefits of emerging technologies and risk similar challenges to that of the Post Office during the shift to digital forms of communication.
The greatest benefits of digital currencies can be realised through the government issuing a digital form of legal tender. This currency would be less expensive, more efficient, and provide greater transparency than current physical legal tender or electronic methods.
The bank does go on to caution that “there are many risks,” ranging from “price volatility” to the risk of hacking, as well as unforeseen regulatory issues, and difficulties converting to fiat currency.
In short: The British government and financial industry risk being disrupted by the rising digital currency movement. Despite the risks, Citi says, there are numerous benefits.
The document also calls for clearer regulation, arguing that: “The absence of clear regulatory guidelines creates uncertainty in this space, and prevents legitimate players from entering the space. Resolving this uncertainty will allow banks to make decisions on how to approach digital currencies.”
Meanwhile, the shift towards digital payments is racing forward. In Britain, cashless payments have just finally overtaken the use of coins and notes for the first time.