The Bank of England has issued a discussion paper on cryptocurrency, raising prospects the much-discussed 'Britcoin' could soon become a reality.

It comes amid a rising interest in unregulated digital-only currencies - such as Bitcoin and Ethereum - coupled with the pandemic accelerating a decline in the use of cash.

Speaking following a virtual meeting with Port of Dover officials, the Bank of England's deputy governor for financial stability, Sir Jon Cunliffe, told KentOnline: "Money changes to reflect the way we want to live and I think that change is happening."

The likes of Bitcoin have grown dramatically in value over recent years but have been subject to dramatic fluctuations which have seen thousands wiped off its value - or added to it - in a matter of hours.

Part of its appeal to many around the world, is that existing cryptocurrencies are decentralised - which means they are not issued or governed by banks or nations and therefore not subject to changes in political decisions or inflationary pressures.

Others, however, are what are known as a 'stablecoin', which aim to avoid the erratic value by tying the value to a national currency - such as the USD Coin which aligns itself to the US dollar. The idea being it makes it easier to exchange the currency for goods and provides stability and reassurance to buyers.

There has long been talk of central banks globally exploring the possibility of issuing a digital form of central bank money – often referred to as Central Bank Digital Currency (CBDC).

The Britcoin, as any Bank of England CBDC has been informally dubbed, would be tied to the rate of the pound.

Adds Sir Jon: "The rise in cryptocurrencies and the drop in the use of cash raises questions for the Bank. Do we want to continue to provide money for people to use in their everyday lives? If they can't use paper cash, do we provide electronic money, which is a big question we're looking at at the moment."

Speaking about the decline in the use of cash, he added: "It was happening before the pandemic. For a long time the majority of payments were cash but by value the majority were cards and non-cash. People didn't buy houses with cash, put it that way.

"But about three years the majority of actual payments were electronic fuelled by a huge rise in online shopping.

"Covid has just accelerated that trend.

"I don't think cash is going disappear - or not soon, at any rate. The bank will make cash available as long as there is demand for it, but it is less useful for people's daily lives than it used to be."

The discussion paper published this week looks for comment on the realm of digital currencies and to provide an insight into the Bank of England's current thinking.

Governor of the Bank of England, Andrew Bailey, explains: "We live in an increasingly digitalised world where the way we make payments and use money is changing rapidly. The prospect of stablecoins as a means of payment and the emerging propositions of CBDC have generated a host of issues that central banks, governments, and society as a whole, need to carefully consider and address. It is essential that we ask the difficult and pertinent questions when it comes to the future of these new forms of digital money.”

The discussion paper adds: "A CBDC could play an important role in sustaining, and potentially expanding, retail access to central bank money.

"Unlike cash, CBDC would be a new form of central bank money that is digital in nature. The Bank has not yet made a decision around CBDC but is actively exploring the opportunities and risks of doing so."

It would look to any digital-only currency working alongside existing notes and coins and not replacing it.

Meanwhile, Sir Jon Cunliffe, a former economic advisor to David Cameron, says the bounce back of the economy following the Covid crisis is, in many cases, exceeding expectations.

And he said the Kent economy will mirror that nationwide.

He explains: "We should see pretty fast rates of growth over the next two or three quarters of the year but that only brings the economy back to pre-Covid levels by the end of this year.

"In a way, the best way to think about it is we took a really sharp and large fall - the economy shrank by 20% in the second quarter of last year - and we've had quite a bumpy ride out of that.

"When you've had a big fall and you recover, you need some pretty fast rates of growth to catch up to where you were. And this looks like it is going to be quite fast.

"In the same way the fall of last spring was the largest recession since 1703, I think this growth rate will be the fastest since 1940 or 41.

"But one shouldn't look at growth rates - they should look at when the economy comes back to the level of economic activity it had before the end of 2019. Before the pandemic. That won't happen until the end of the year.

"And this all relies on there not be a mutant version of the virus that sets us back.

"As we come back with these fast rates of growth, the spare capacity in the economy will be used up and given we have this surge, and we've lost some capacity during the Covid crisis, you can expect to see some supply problems and some inflationary pressures.

In the same way the fall of last spring was the largest recession since 1703, I think this growth rate will be the fastest since 1940 or 41

"But there's terrific uncertainty. How long will the bounce last? What will people consume from the savings? What happens when the government support is withdrawn, when the furlough scheme comes to an end in the autumn?"

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