Bitcoin tumbles 8% after China steps up crackdown on crypto mining, shutting down 26 key sites in Sichuan

China bitcoin mining crackdown Chinese flag cryptocurrencies
China is increasingly cracking down on bitcoin.

Bitcoin dropped 8% on Monday after Chinese authorities ramped up their crackdown on cryptocurrency “mining” over the weekend, with bodies in the Sichuan province ordering 26 of the biggest miners to halt operations.

The world’s biggest cryptocurrency fell to $32,950 as of 6.20 a.m. ET. Bitcoin was down around 49% from April’s record high of close to $65,000, but was still roughly 12% higher for the year.

Other cryptocurrencies also dropped sharply, with ether down around 6% and binance coin roughly 4% lower, according to Coinmarketcap. A broader market sell-off also appeared to be weighing on crypto, as investors moved towards safer assets.

The latest move by Chinese authorities to restrict bitcoin mining came in the southwestern Sichuan province over the weekend, when bitcoin miners were told to “clean up and terminate” their operations. Sichuan authorities said 26 bitcoin mining companies must be closed down on Sunday, according to a notice seen by the South China Morning Post.

Chinese state media outlet Global Times then reported that more than 90% of China’s bitcoin mining capacity was estimated to be closed down, at least for the short term, on Sunday.

Bitcoin mining – whereby computers solve complex puzzles to secure the network and mint new coins – has become a target in increasingly climate-conscious China because of the huge amounts of energy it uses.

Sichuan’s clampdown followed similar moves by authorities in Xinjiang, Yunnan and Qinghai.

“The dominant driver of bitcoin right now is the crackdown on mining & trading in China that began in May,” Michael Saylor, a leading bitcoin bull and chief executive of tech firm MicroStrategy, wrote on Twitter.

“This created a forced & rushed exodus of Chinese capital & mining from the bitcoin network,” Saylor said, describing this as “a tragedy for China and a benefit for the Rest of the World over the long term.”

Jeffrey Halley, senior market analyst at currency group Oanda, said the broader drop in risky assets following the Federal Reserve meeting was also weighing on bitcoin. Stocks have sold off after Fed officials on Wednesday moved forward their estimates of when the US central bank would have to raise interest rates.

“If, as I expect, the global buy-everything unwind continues this week, bitcoin will feel those chill winds as well,” Halley said.

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Global shares head for worst week in a month, while the dollar trades near 2-month highs as the Fed’s shift spooks investors

Wall Street decorated with American flags.
A more-hawkish stance by the Federal Reserve has forced equity indexes off recent record highs and boosted the dollar.

  • Global shares eased while the dollar rose as investors mulled over a more hawkish US rate outlook.
  • Gold headed for its biggest slide since February, pressured by rising bond yields and a firm dollar.
  • The dollar traded near its highest in two months, buoyed by a rise in Treasury yields.
  • See more stories on Insider’s business page.

Global shares on Friday headed for their steepest weekly drop in a month, while the dollar neared two-month highs, as investors began to prepare for an end to the Federal Reserve’s multitrillion-dollar economic-support program.

The Fed met this week to discuss monetary policy and, in light of the resilience of the recovery in the US economy and the pickup in consumer inflation, indicated it might raise interest rates by the end of 2023, sooner than it originally expected.

This more-hawkish stance has forced equity indexes off recent record highs, boosted the dollar, and forced government bond yields up, as chances grow for the central bank to taper the vast asset-purchase program it put in place last year to keep borrowing rates low and protect the economy.

Futures on the S&P 500 and the Dow Jones Industrial Average were flat Friday, while those on the Nasdaq 100 rose 0.2%, suggesting tech stocks might get a lift when trading starts later in the day.

The MSCI All-World index of global shares was down 0.4% on the day, heading for a 0.64% decline this week, the largest in percentage terms in a month.

“Investors have been digesting the latest statements from the US central bank, which surprised markets with a far more hawkish stance than expected,” the AXI strategist Milan Cutkovic said.

“While this hasn’t led to a reversal in stock markets, it could limit further gains in the near-term as taper talks intensify,” he said.

In Europe, the STOXX 600 index was last down 0.1%, echoing the modest weakness across the Asian market, where the Shanghai Composite closed flat and Tokyo’s Nikkei lost 0.2%.

The dollar hovered near its highest in about two months, buoyed by an influx of capital from investors who have ditched assets that tend not to perform well when US rates rise, such as emerging-market currencies and some commodities.

“The world’s reserve currency is heading for its best week in nearly nine months after the surprise change in tone from the Federal Reserve on Wednesday continues to rattle markets and fundamental positioning,” Lukman Otunuga at FXTM said.

“A market accustomed to liquidity on tap from a ‘patient’ Fed has had to face the reality that a tightening is coming far sooner than it previously thought,” he said.

Yields on the five-year US Treasury note, which move inversely to prices, were down 2 basis points on the day, at about 0.858%.

In cryptocurrencies, bitcoin was down 3.7% at about $37,840, while ether was down 4% at about $2,340, in line with the sell-off across other risk assets.

The gold price was heading for its largest weekly loss since early February, on track for a drop of 4%, thanks in part to the strength of the dollar, which makes bullion less appealing for non-US investors to hold.

“The most important driving force behind the price slide is the massive appreciation of the US dollar, which has gained more than 2 cents since the Fed’s meeting on Wednesday,” the Commerzbank analyst Carsten Fritsch wrote in a research note.

Gold was last up about 1% at $1,792 an ounce, having recovered some of Thursday’s 3% decline, which was the biggest one-day drop since January.

Other commodities also declined broadly, having been swept lower by the same dollar-related selling as gold. Lumber was set for a weekly drop of 15%, while copper was on track for a decline of 7.5% and palladium, which is used in autocatalysts for gasoline-powered vehicles, was heading for a fall of 7% on the week.

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Emerging markets could be the next big frontier for crypto. A slew of politicians want to follow El Salvador and adopt bitcoin as legal tender.

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  • Emerging markets are pioneering digital and crypto currency usage, trading and mining.
  • Since El Salvador voted to adopt bitcoin as legal tender, a slew of politicians have said they want to follow suit.
  • Many showed their support through tweets or by adding the symbolic laser eyes to their Twitter pictures.
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Cryptocurrencies can often stir up concern among conservative investors and few are as conservative as central banks, and regulators are definitely skeptical. But this does not appear to be the case in emerging markets.

Politicians, central bankers and regulators across the developed world might be a little wary, but those in the emerging world are pushing the boundaries of crypto adoption, by pioneering how digital tokens are used, traded and mined.

In fact, they could become crypto’s next big frontier, as a slew of politicians from Brazil, and Argentina and even Tonga have publicly stated that they want their countries to follow the example of El Salvador in making cryptocurrencies legal tender.

El Salvador’s Congress approved a law last week that made the small Central American country the first to accept bitcoin as legal tender, giving it equal status to the US dollar in El Salvador.

“Other countries will follow El Salvador’s lead for two main reasons, making bitcoin legal tender will attract Bitcoin entrepreneurs and ease the burden of sending money internationally.” Edward Moya, senior market analyst at OANDA told Insider.

Indeed, since El Salvador’s president Nayib Bukele first announced the bitcoin bill, a slew of other emerging markets politicians have said that their own countries should follow suit.

Paraguayan congressman Carlitos Rejala tweeted “This week we start with an important project to innovate Paraguay in front of the world! The real one to the moon #btc & #paypal”.

Gabriel Silva, a congressman from Panama said his country could not afford to be left behind and a broader adoption of crypto was necessary for the country to attract technological innovation and entrepreneurship.

Brazilian politician Gilson Marques and the Argentinian Francisco Sánchez were among those who added laser eyes, a symbol used by bitcoin bulls, to their public profile pictures.

Central banks around the world are considering launching their own digital currencies that would be centrally managed and regulated – a key difference to existing cryptocurrencies like bitcoin.

The Federal Reserve and European Central Bank are still in the very early stages of looking into a digital currencies, while many emerging-market central banks are making fast progress in the area.

“Their use in small-scale trading and remittance transfers from workers abroad are among the main reasons for the popularity of crypto currencies in EM. Central bank digital currencies (CBDC) could also facilitate getting social transfers to the poor and improve transparency of the large informal economy. These channels could be positive for economic growth in EM.” a recent Bank of America research note said.

The popularity and value of crypto currencies like bitcoin and ether has boomed over the past year. They’re both an asset class in their own right, as well as a means of payment for goods and services. Various sports teams like the Dallas Mavericks or Oakland A’s for example accept cryptocurrencies as payments for tickets or merchandise.

In El Salvador, a whole town was already running on crypto – El Zonte, also known as ‘Bitcoin Beach’. Soon the whole country could now be working in similar ways and, if some politicians get their will, other emerging markets countries could as well.

El Salvador’s decision has however been received cautiously by regulators and politicians in developed markets. Bank of England Governor Andrew Bailey said just this week that cryptocurrencies are too volatile to be used as a payment form.

And the World Bank rejected El Salvador’s request to help with the implementation of bitcoin over environmental concerns linked to crypto mining. Further, regulators have shown concern about the use of crypto to fund illicit activities.

Bitcoin is already up by 300% in the last 12 months and, if more countries adopt it, it should stand to gain even more, even though regulators are tightening their scrutiny of the market, analysts said.

“Bitcoin becoming legal tender in other countries should support the bull case for bitcoin,” OANDA’s Moya said.

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US stocks slip from record highs as investors mull weak retail-sales data ahead of Fed decision

Stock Market Bubble
A trader blows bubble gum during the opening bell at the New York Stock Exchange (NYSE) on August 1, 2019, in New York City.

  • US stocks slipped from record highs as investors mulled the disappointing retail sales ahead of the FOMC’s two-day meeting.
  • The 10-year Treasury yield has hovered near 1.5% for most of the day.
  • Crude oil traded at the highest level since 2018, while lumber, gold, and copper slipped.
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US stocks slipped from record highs Tuesday as investors mulled the disappointing retail sales ahead of the Federal Open Market Committee’s two-day meeting.

Spending at US retailers for the month of May slumped for the first time since February as more economic restrictions were reversed and Americans settled into a new sense of normal.

US retail sales fell 1.3% in May, the Census Bureau. Economists surveyed by Bloomberg held a median estimate for a 0.7% decline. The decline places monthly sales at $620 billion and just below the record-high seen in April.

Meanwhile, investors continue to weigh inflationary pressures ahead of the FOMC decision due Wednesday. Most economists are anticipating that the central bank will leave its policy mostly unchanged. Investors will be focusing on tapering discussions, the latest economic projections, and inflation.

“Despite the ‘transitory’ message regarding inflation, some on the Committee must be twitching a little uncomfortably,” said Marcus Dewsnap, head of fixed income strategy at IGM, which is part of Informa Financial Intelligence.

Hard data so far hasn’t quite suggested the sort of second-quarter that will force economic growth to hit the Fed’s 2021 projection, Dewsnap added.

The 10-year Treasury yield hovered near 1.5% for most of the day.

In March, Fed officials saw consumer prices rising 2.4% in the fourth quarter of 2021 from a year earlier. That pace, they said, would be consistent with their goal of 2% average annual inflation over the long run.

Here’s where US indexes stood at the 4:00 p.m. ET close on Tuesday.

Online gaming company DraftKings plunged as much as 12% on allegations by a short seller of illegal activity. A report from Hindenburg Research, a short seller, claimed DraftKings is hiding “black market operations.”

Meanwhile, short-sellers betting against meme stock AMC Entertainment lost $512 million on Monday when the movie theater chain rallied 15%, according to Reuters, citing data from analytics firm Ortex.

Solid Power, an electric-vehicle battery producer, announced it’s going public by merging with blank-check firm Decarbonization Plus Acquisition Corporation III in a deal valued at $1.2 billion.

In cryptocurrencies, bitcoin finally hit the $40,000-level on Monday after trending below that level to date in June.

Still, a new survey found that hedge fund bosses are planning to ramp up their holdings of cryptocurrencies, predicting that an average of 7.2% of their assets under management will be held in digital tokens by 2026.

Crude oil traded at the highest level since 2018. West Texas Intermediate crude was up 1.96% to $72.27 per barrel. Brent crude, oil’s international benchmark, gained 1.78% to $74.16 per barrel.

Gold slid 0.45% to $1,858.92 per ounce.

Copper also tumbled to a seven-week low amid concerns that China will gradually release its stockpiles in the coming months.

Lumber joined the downturn, sliding for the 10th straight day before mounting a recovery as the pandemic-driven boom in the commodity continues to show signs of weakness.

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Ethereum saw record outflows last week, as investors pulled $13 million from the second largest cryptocurrency

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Ethereum products suffered outflows in early June.

  • Investors pulled $12.7 million from ethereum investment products last week, according to data from CoinShares.
  • The outflows mark a record high for ethereum after the cryptocurrency served as a ‘stalwart’ during bitcoin’s recent slide.
  • Bitcoin outflows are showing signs of cooling.
  • See more stories on Insider’s business page.

Ethereum products were hit with outflows of $12.7 million in early June, the biggest decline on record as institutional investors were working out their views on the blockchain’s digital token after serving as a pillar of support during bitcoin’s recent plunge.

The data from CoinShares, a digital currency management firm, came in an update published Monday which also said outflows from digital assets last week reached $21 million, marking a second straight week of negative net investment.

The moves in ethereum marked a shift from the prior week when inflows were $33 million, illustrating that the ether token remained the top choice in so-called altcoins among investors.

“Ethereum has been the stalwart relative to bitcoin over recent months but inflows over the course of last week were mixed, implying mixed opinions amongst investors,” said CoinShares in its update. The price of ether dropped about 12% in the week ended June 11 and fell below $2,400.

Bitcoin, the world’s most traded cryptocurrency, was rocked by a recent selloff that began in May stemming in part from threats from China about cracking down on mining and trading and cryptocurrency taxation efforts by US officials.

But bitcoin outflows of $10 million last week were sharply less than the prior week’s record decline of $141 million. Trading activity in bitcoin investment products rose by 43% compared with the previous week, said CoinShares.

Total weekly outflows in digital products have reached $267 million since mid-May, which represents 0.6% of total assets under management.

“While sentiment has weakened over the last month investors on the whole remain committed given the magnitude of inflows seen this year which represent 13% of AuM, or $5.8 billion,” a figure that nearly matches the $6.7 billion logged in 2020, the company said.

Bitcoin this week has jumped above $40,000 after Elon Musk tweeted that Tesla would accept bitcoin payments again once mining can be done using cleaner energy. Meanwhile, ether’s price advanced and flirted with $2,600.

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Goldman Sachs will reportedly offer ether options for clients as the firm expands its crypto-trading business

Ether
  • Goldman Sachs will offer ether options and futures to its clients, Bloomberg first reported.
  • “We’ve actually seen a lot of interest from clients who are eager to trade,” Mathew McDermott of Goldman said.
  • The bank also has plans to facilitate trades via exchange-traded notes tracking bitcoin.
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Goldman Sachs will offer ether options and futures to its clients as the investment bank expands its cryptocurrency trading business, Bloomberg first reported.

“We’ve actually seen a lot of interest from clients who are eager to trade as they find these levels as a slightly more palatable entry point,” Mathew McDermott, head of digital assets at Goldman, told Bloomberg.

He continued: “We see it as a cleansing exercise to reduce some of the leverage and the excess in the system, especially from a retail perspective.”

The New York-based bank is expanding from its bitcoin offering after restarting its cryptocurrency trading desk to trade bitcoin futures earlier this year amid a boom in the popular coin. Goldman first set up a cryptocurrency desk in 2018.

The 47-year-old McDermott also told Bloomberg that Goldman has plans to facilitate trades via exchange-traded notes tracking bitcoin.

Cryptocurrencies, led by bitcoin, have staged a modest rebound on Monday following its massive crash in May when it lost almost half of its market value in one week alone.

Yet a recent finding from crypto-asset broker Voyager revealed that 81% of respondents in a recent survey are more confident in the future of cryptocurrency following last month’s sell-off.

“Institutional adoption will continue,” McDermott said. “Despite the material price correction, we continue to see a significant amount of interest in this space.”

In March, that bank’s COO and president John Waldron said he has seen an increase in interest from his clients when it comes to investing in bitcoin.

“Client demand is rising,” Waldron said in a Wolfe Virtual FinTech Forum. “The pandemic has been a significant accelerant. There is no question in our mind there will be more digital commerce … and (use of) digital money.”

Read more: Goldman Sachs says buy these 37 stocks that will offer strong returns with minimal risk through year-end as growth names regain leadership

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A top exec at ‘green’ crypto firm Chia says today’s volatility is just like the wild price swings in dot-com stocks in the 90s – and that both further turbulence and regulation will ultimately help the market

Gene Hoffman
Chia President and COO Gene Hoffman

  • Gene Hoffman, president COO of Chia, told Insider the company welcomes government regulation.
  • Hoffman said volatility was ‘required’ before mass adoption of crypto and the technology that underpins it.
  • Chia coin minting uses less energy, but has been criticized for creating electronic waste.
  • See more stories on Insider’s business page.

This year’s extreme volatility in the cryptocurrency market has troubled regulators and given big investors pause for thought. But it doesn’t faze Gene Hoffman, president and COO of Chia, the new $500 million “green” token.

“During adoption phase, volatility is almost required,” he told Insider in an interview. “It’s kind of like saying that we’re gonna adopt the internet in the late 90s without having volatility in internet stocks. Was not going to happen that way.”

In the heady days of the late 1990s, traders chased anything remotely connected to the internet. Amazon was one of the market darlings at the time and could often rise or fall anywhere up to 60% in a month in the run-up to the bust in early 2000.

Cryptocurrencies have swung wildly throughout May and June, losing as much as $460 billion in a single day last month after China – home to most of the world’s crypto mining capacity – said it would clamp down on banks to prevent them from providing crypto-related services. Furthermore, Tesla CEO Elon Musk tweeted his concern about bitcoin’s energy use, calling it “insane”. Around the same time, his company stopped accepting bitcoin as payment for its luxury electric vehicles.

Chia’s XCH token, which only began trading on May 3, has been no exception. It debuted at $1,498 and fell by two thirds in just three days. It has since swung from highs above $1,600 to lows this week below $540, according to data from CoinMarketCap.com.

But Hoffman thinks these are just teething problems before there is the mass adoption of cryptocurrencies and the blockchain technology that underpins them.

And others agree – billionaire entrepreneur Mark Cuban has likened cryptocurrencies to the dotcom bubble of the late 1990s. Cuban said in January he expects some coins will survive future crashes to become the crypto world’s equivalent of Amazon or eBay.

Chia was founded by BitTorrent inventor Bram Cohen in 2017, and promotes its “proof of space and time” process as a much more energy-efficient way of mining coins than bitcoin’s “proof of work.” The company raised $61 million in its latest funding round.

Proof of work is an algorithm in blockchain technology that is used to confirm bitcoin transactions and rewards miners with new coins. It’s also highly energy intensive and makes bitcoin one of the less climate-friendly coins out there. Rival coin ether’s ethereum network is soon moving to a “proof of stake” process, which is slightly different and is far more energy-efficient, for example.

Chia’s XCH token earns its green credentials from the energy use of its mining process. Rather than “mining” for coins, the network’s users “farm” them.

Chia “farmers” generate and store cryptographic numbers into “plots” onto their hard drives or solid state drives (SSDs) – a newer, faster type of storage device. A farmer’s plot can win the chance to create a block and receive a reward on the blockchain based on the proportion of total space a farmer has filled up compared to the whole network.

A server – called the “Timelord” – verifies the block and awards XCH tokens to the farmer in a process the company calls “proof of space and time”.

But Chia has received criticism for simply creating a new kind of waste, specifically burnt-up hard drives and SSDs. Demand for these storage devices has skyrocketed in Europe, while some IT businesses in Vietnam said they ran out of stock last month.

“There’s no free lunch,” Hoffman said. “It’s hard to say that being a thousand, 10,000 times more efficient for the same security isn’t a massive innovation.”

Hoffman also said that burning through SSDs can be avoided: “If you use the $79 cheap-y SSD and try to plot a bunch against it you might burn that up, but the $99 will last you a lifetime,” he said. “So the people who are complaining about that are buying the wrong tool for the job.”

Regulation is key to survival

Aside from bitcoin’s carbon footprint, the prospect of ever-tighter regulatory scrutiny has been one of the key drivers in the drop from the token’s record high around $65,000 in April, to closer to $30,000 now. And this hasn’t just affected bitcoin. Ether, Ripple’s XRP, meme currency dogecoin, Polkadot’s DOT, or Cardano’s ADA are all down sharply from the highs of earlier this year as a result.

Hoffman said Chia embraces government regulation – a major incentive behind the company’s plans to go public “relatively quickly,” possibly via a blank-check company, or SPAC.

“Everyone who’s kind of merged their equity with their coin has generally been doing an illegal securities offering, and that can’t scale, that cannot be adopted, that cannot become the thing that governments run central bank digital currencies on,” Hoffman said.

Part of cryptocurrencies’ appeal is their decentralized nature – no one government or central bank controls them – and the degree of anonymity they afford their users.

But Hoffman believes people want transparency.

“You want to see the audited financials and the quarterly reports,” he said. “These are not crazy ideas if you’re trying to build trust.”

And he hopes that by listing his company on the stock exchange, and keeping its corresponding XCH token as a separate asset, investors will be protected against wild swings in coin prices when using it.

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The CEO of Kraken says the crypto exchange is considering a traditional IPO following rival Coinbase’s volatile direct listing

Jesse Powell
Jesse Powell is the chief executive and co-founder of crypto exchange Kraken.

  • Kraken CEO Jesse Powell said he is considering an IPO when his company goes public instead of a direct listing, Fortune reported.
  • Powell’s thinking was influenced by Coinbase’s volatile direct listing in April.
  • The CEO ruled out going public via SPAC, saying his company is “too big” for it already.
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Kraken founder and CEO Jesse Powell said he is considering a traditional initial public offering to take the cryptocurrency exchange public instead of a direct listing following Coinbase’s volatile performance.

“An IPO is looking a little more attractive in light of the direct listing’s performance,” Powell told Fortune. “I would say we’re looking at it more seriously now having the benefit of seeing how the direct public offering played out for Coinbase.”

Coinbase, the largest cryptocurrency exchange in the US, went public on April 14 in what many viewed as a milestone from the digital asset ecosystem. The company was valued at $68 billion ahead of its direct listing but now hovers around a market cap of $58 billion.

Powell pinned the volatility of Coinbase’s performance to the method it used to go public, especially since existing shareholders are not prohibited from selling their shares at the debut in direct listings.

Unlike in an IPO, companies that go public via direct listing do not issue new shares.

Following a record for Kraken’s bitcoin trading volume in the first quarter of 2021, Powell had floated the idea of following Coinbase’s direct listing route.

The Kraken boss told Fortune that he is still optimistic his company can go public next year.

“Hopefully we’ll have more analyst coverage out, and there’s just more of a track record of growth for the industry that people feel like they can rely on,” he said.

While mulling over how best to take Kraken public, Powell said that a merger with a blank-check company was not an option.

“It might have been possible a few years ago, but today, I think we’re too big to consider doing a SPAC,” he said.

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Fintech bank Revolut is adding dogecoin to its offering to meet a boom in customer demand for the cryptocurrency

FILE PHOTO: A Revolut logo is seen in this illustration taken January 6, 2020. REUTERS/Dado Ruvic/Illustration
A Revolut logo is seen in this illustration

Revolut has added dogecoin to its offering to meet booming customer demand for the meme cryptocurrency, the fintech bank said on Tuesday.

“There just aren’t enough dogs in the Revolut app…but we’re about to change that. Much Dogecoin. Such wow. How Revolut? We’re letting the DOGEs out!” the fintech bank tweeted alongside a dogecoin-inspired video on Tuesday.

Dogecoin is the 30th coin to be added to Revolut’s crypto investment offering and was released as part of the firm’s ‘New Tokens Tuesday campaign’, during which it adds a new token to its platform each Tuesday. The campaign began last week with the addition of eight Oracle and Network tokens including Polygon.

“One of the most popular user requests over the past couple of months has been to add Dogecoin and we have answered the call! We have just launched Dogecoin in-app. So now keen crypto customers and those new to the game can buy and sell this popular token.” Edward Cooper, Revolut’s head of crypto said in a statement.

The Revolut app offers banking and investing capabilities for individual and business clients. Its crypto services allow customers to buy, sell or send major cryptocurrencies like bitcoin, ether, bitcoin cash, ether and litecoin. People can use their cash balance on the app directly to buy crypto without having to use an exchange and new funds become available immediately.

Meme-cryptocurrency dogecoin has soared in value and investor recognition this year, as it has become increasingly popular on social media. Crypto investors have started to see it as a legitimate asset that has real-life applications rather than as the joke it started as.

Dogecoin is currently the sixth largest cryptocurrency by market capitalization, according to Coingecko data. It reached an all-time high of $0.731578 after a social media fueled rally in early May, but has since lost around 55% since hitting that point. Over the past week, dogecoin has lost over 11% as cryptocurrencies across the board have struggled, but it inched higher on Wednesday and was last up 0.4% in the 24 hours to 8:12 am E.T., trading at $0.331914.

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‘Britcoin’ may soon be a reality after the Bank of England says it is looking more deeply into a digital pound

A close-up of a replica bitcion is seen with a British flag
A close-up of a replica bitcoin is seen with a British flag

  • The Bank of England said it would look more closely at launching its own digital currency.
  • There no decision yet on “Britcoin,” but a digital currency would complement, not replace, banknotes, it said.
  • One possible scenario is one-fifth of all UK retail bank deposits are in a new form of digital money.
  • See more stories on Insider’s business page.

The Bank of England is going to look more closely at launching its own digital currency, although it is still to make a decision on whether to introduce one.

The BoE on Monday released a discussion paper seeking response to its thoughts on a central-bank digital currency, which it put forward last year, as it believes it should “at the very least, be carefully studying CBDCs,” it said.

“The Bank of England has not made a decision on whether to introduce CBDC, but is committed to engaging widely on the benefits, risks and practicalities of doing so,” it said in a statement. “The Bank now intends to deepen its exploration of CBDC.”

CBDCs are effectively cryptocurrencies that are pegged to a national currency and controlled by the central bank. They operate as “stablecoins” – a digital token whose value is pegged to an underlying asset. The key difference between a stablecoin and a CBDC is the former is controlled by a private-sector entity.

Interest in digital currencies among central banks is picking up, as investors big and small jump onto the cryptocurrency bandwagon. Virtually every cryptocurrency, from bitcoin to ether, has hit record highs this year.

China is already running trials of its digital yuan, while the Federal Reserve plans to release a discussion paper in the coming weeks about its thoughts on digital payments. Jon Cunliffe, the BoE’s deputy governor, said last month it was “probable” the central bank would launch its own digital currency, which market watchers have nicknamed “Britcoin”.

“A CBDC could contribute to a more resilient, innovative and competitive payment system, but it would also raise significant questions for the economy and financial system,” Cunliffe said in Monday’s statement.

“The Bank has not yet made a decision on whether to introduce a CBDC. Were it to do so, any CBDC would complement, rather than replace, banknotes,” he added.

In its paper, the BoE laid out a scenario to illustrate what might be the demand for alternative means of payment. Under its model, it estimates 20% of all UK retail deposits will be in new forms of digital money.

“In the illustrative example, a fifth of all UK retail deposits transfer to new forms of digital money. Factors such as convenience, trust, and perceived safety are assumed to play a key role in determining demand for new forms of digital money,” it said.

The central bank plans to join forces with the UK’s finance ministry, the Treasury, to explore the public-policy issues around a CBDC, in order to look more closely into the potential launch of a digital currency. Any CBDC could only be harnessed if it is widely used and easily accessible to a broad range of groups in society, it said.

In addition to respecting users’ privacy, any CBDC would comply with the rules around money laundering or financing crime that exist for current digital payment systems.

Crucially, any CBDC should not interfere with the BoE’s ability to manage monetary policy and ensure financial stability. “For example, the Bank will carefully consider any risks associated with the outflow of deposits from the commercial banking sector,” the BoE said in the paper.

The central bank stressed in the paper that it supports efforts to improve payments in the UK, where these are safe, viable and well understood.

“A CBDC should only be introduced if it adds sufficient value and delivers net benefits, and if launched, should be designed to co-exist with other payments innovations. When exploring CBDC, the Bank will also give full recognition to the potential of private sector alternatives to deliver the outcomes sought,” it said.

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