Regulated Britcoin doesn't bring anything new to the table
Britcoin is getting a lot of buzz at the moment. It sounds exciting – a new type of cryptocurrency that’s safe and stable, designed to make digital transactions easier.
Ultimately, though, I don’t think Britcoin solves anything new. I don’t see how it brings any value to the fintech space when we already have so many technological innovations that address the same issues.
That being said, it does demonstrate that London is keen to get behind new ideas and solidify its role as the hub of fintech in Europe.
Britcoin, also known as the digital pound, is a central bank digital currency (CBDC) that uses the same blockchain technology as other cryptocurrencies. The difference is that Britcoin will be issued by the Bank of England, so its use will be highly regulated.
Unlike classic cryptocurrencies, the price of Britcoin will be stable. That’s because it is pegged to the value of the pound; £1 in Britcoin is worth the same as a physical £1 coin.
In comparison, Bitcoin saw a 50 per cent value nose-dive between April and June 2021. Proponents argue that this makes Britcoin a safer alternative to crypto and avoids passing on the risks of volatile valuations to consumers.
The defining difference between Britcoin transactions and internet banking transactions is that Britcoin avoids interaction with banks. At times of economic crisis, banks are often the biggest and most expensive dominoes to fall, so not having to deal with banks protects savers from bank runs and catastrophic collapses.
From what I can see, Britcoin doesn’t offer anything new to consumers who are familiar with online banking. Banks have come a long way in recent years, improving their technology thanks to competition from challenger banks to make transferring funds incredibly quick and smooth.
As the founder of a cross-border payments fintech firm, I can confidently say that we’re not lacking in technology to transfer money. Banks and fintech firms have already addressed issues of efficiency. The biggest barrier is regulation, something which Britcoin won’t avoid.
Part of the appeal of cryptocurrency is that it bypasses banks, just like Britcoin and other CBDCs. That’s where the similarities end. The rest of cryptocurrency’s appeal falls into two categories: trading and a lack of regulation.
The huge fluctuation in crypto valuations makes it an asset that you can trade and profit from without ever having to use it as a method of payment. While the number of companies that accept cryptocurrencies as payment has increased, it’s still by no means mainstream.
Also, cryptocurrency’s lack of regulation makes it the Wild West of the financial market, allowing for money to be exchanged without a third party or any regulatory oversight.
But, the lack of regulation has opened up crypto to criminals, and in no way promotes fair play in the financial sector.
We need regulations to protect consumers and provide businesses with a level playing field. It’s like security checks at the airport. It might make the process slower, but we accept that the added checks are important for our safety and security in the same way that we want to stop criminals from being able to transfer capital across the globe.
Britcoin sits in a strange space between cryptocurrency and typical banking. It doesn’t have any of the features that made cryptocurrency a success, and the plans that have been revealed so far suggest that it will work in the same way as online banking – just without the banks. So, I’m left wondering what Britcoin actually aims to achieve.
While I struggle with seeing the value in Britcoin, I can appreciate the fact that London is pushing for the kind of innovation and creativity that has solidified its position as a global hub for fintech.
Digital banking and the rise of fintech have brought challenges from the likes of New York, Frankfurt, and Paris, but an entrepreneurial spirit and ability to evolve with the times has kept London at the cutting edge, whether that be creating the world’s first ATM in 1967 or rolling out the first contactless bank cards in Europe.
The character of London’s fintech scene is absolutely invaluable – and we should be using this to its full potential rather than wasting on digital currency innovations that don’t bring anything new to the table. Instead, we need to continue pushing the boundaries of the industry to retain London’s crown as the world’s best financial hub.
Rafal Andzejevski is an international entrepreneur and Founder and CEO at PayAlly, a financial services provider.
