The Bank of England’s governor reiterated that fiat currencies will not be replaced by crypto like Bitcoin since they are extremely speculative assets.
The current impasse between the fiat market and the crypto assets industry has undeniably put most central banks, including the Bank of England (BoE), in an alert mode. Over the years, experts have argued how internet money will prove problematic to tax collection. Furthermore, most Bitcoin holders are long-term, and there are few mechanisms to tax unrealized profits in the industry. Additionally, the ability to self-custody in the cryptocurrency market has significantly reduced the need for traditional banks, especially with the emergence of the neo-banking sector.
As a result, the antagonism between the traditional banking sector and the cryptocurrency industry is evidently ongoing, particularly during the cryptocurrency winter. Nonetheless, traditional investment fund managers, led by the largest hedge fund with nearly $10 trillion in AUM, BlackRock Inc (NYSE: BLK) have increased their interest in the cryptocurrency market amid rising global inflation.
BoE Governor Speaks on Bitcoin and Economic Outlook
According to BoE Governor Andrew Bailey, the high increase in borrowing cost has undeniably widened the use of Bitcoin as a speculative asset as more investors navigate the high cost of living. The high inflation and a possible economic recession incoming, which has been predicted to happen during the second half of 2023, have seen most investors flee the fiat market to the crypto industry. Currently, the United Kingdom’s inflation stands at about 8.7 percent, more than four times higher than the desired 2 percent.
“Some of that tightening is still to come through the policy pipeline, and we expect underlying inflationary pressures to recede as headline inflation falls,” Bailey said in the text on Monday.
Bailey further noted that the energy crisis, which was mostly exacerbated by the Russia-Ukraine war, is expected to ease in the coming months. A drop in energy prices is a direct ease in food prices.
“Looking ahead, headline inflation is set to fall markedly over the remainder of the year. This largely owes to lower energy prices as last year’s substantial increases drop out of the annual calculation. Food prices should fall too as lower commodity prices feed through to prices in the shops,” he added.
Meanwhile, Bailey criticized the cryptocurrency industry including the stablecoins market for failing to meet the standards of safe money. Worth noting that the Bank of England is actively working on rolling out a Central Bank Digital Currency that operates in a similar manner to the stablecoins. However, some central banks have been criticized for using the digital currency industry to suppress financial freedom.
BOE’S BAILEY: BITCOIN-TYPE CRYPTO BEST SEEN AS EXTREMELY SPECULATIVE ASSETS
— *Walter Bloomberg (@DeItaone) July 10, 2023
Nonetheless, the United Kingdom has already enacted regulatory policies to safely adopt the cryptocurrency market through blockchain technology.
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