Leading global bank Citi has called on the government of the United Kingdom (UK) to adopt a digital form of legal tender to reduce the cost of moving money, increase consumer spending and add greater liquidity to the market.
Citi made the request in a response, obtained by CoinDesk, to the government's public call for Information on digital currencies from the UK Treasury made in November, which asked for views on the risks and benefits of cryptocurrencies such as bitcoin.
The aim of the consultation is to in order to decide whether the UK government should support innovation in the area of digital currencies and look at the risks they present.
Citi, which claims its aspiration is to be the world’s “digital bank”, has been working with a network of innovation labs to investigate the use of digital currencies, and says it has come to believe their adoption is “inevitable.” However, the use of specific digital currencies such as bitcoin is less clear.
The benefits of digital currencies are that they increase transparency and benefit consumers, merchants and governments in reducing the cost of moving and handling money, hence leading to increased economic activity by consumers and a more liquid market.
Governments and banking incumbents are not, however, taking advantage of these benefits yet and Citi believes the UK government should assist the shift by issuing a digital currency of its own. The bank stated:
“This currency would be less expensive, more efficient and provide greater transparency than current physical legal tender or electronic methods.”
“We believe the benefits are realized through the application of the underlying technology to provide an extensible, decentralized, trustworthy and generic transaction store to solve a wide variety of problems,” the bank added.
Not everyone is thrilled with the idea, however. "Citi's call for the UK government to adopt ‘digital money’ is too simplistic and represents a view of the technology which is already twelve months out of date,” said Preston J. Byrne, COO and General Counsel at Eris Industries. “Money is only one small (and fairly simple) piece of data a blockchain database is capable of coordinating.” Adding:
“[T]he future lies in linking up representations of value with event control and processing e.g. calculating monthly welfare benefits and then using this architecture to automate significant chunks of the Civil Service out of existence."
Nevertheless, government coffers could certainly be boosted by this plan with the bank believing blockchain technology would allow it to keep better track of transactions, creating greater transparency and enable automated tax collection.
Citi also said the absence of clear regulatory guidelines was holding back the sector by creating uncertainty, and said government should move to resolve this in order to allow banks to come up with digital currency solutions, emphasizing that “this could address the greatest barrier to entry that currently exists.”
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