Central vs Crypto

Centralised Banking vs Cryptocurrencies

Before we start, I want to make it clear that this is mostly an opinion piece. I will present some facts for both sides of the fence and some opinions, and then it’s up to you to make your own opinion of it. What’s that saying – opinions are like … noses – everybody has one, and they all smell.

We covered CBDCs before in the newsletter. If you are unfamiliar with the concept it stands for “central bank digital currency”, a form of digital currency issued by a country’s central bank.

The Bank of England is this country’s central bank and since the beginning of this year, they have been considering and researching a digital pound. The digital pound would be denominated in sterling and its value would be stable (in reference to banknotes). £10 in digital pounds would always have the same value as a £10 banknote.

The current Governor of the Bank of England is a fella by the name of Andrew Bailey. Andrew comes from a long line of credible work and was part of a group responsible for shouldering the responsibility of sorting out the last financial crisis (Northern Rock, HBOS, etc.), going through and offering a lifesaver of some kind in the midst of the debris at the FCA.


Bailey isn’t the biggest fan of Crypto and has a history of expressing caution regarding the currencies. On several occasions, Bailey has voiced concerns about the speculative nature of digital currencies, stressing that investors should be prepared to lose all their money if they choose to invest in them.

More recently, Andrew delivered a speech (July 10) in which he moved smoothly from the central bank’s efforts to control UK inflation rates and maintain public trust in financial institutions to why cryptocurrencies are not money.

During his speech at the Mansion House in London, Bailey also highlighted his belief that despite the rise of digital currencies, traditional cash is here to stay. While these sentiments are not new to Bailey’s rhetoric, his firm reiteration serves as a reminder of the regulatory scrutiny that Bitcoin and its digital peers are under, especially from central banks.

Bailey didn’t reserve his criticism for cryptocurrencies alone; he also took aim at stablecoins, categorising them as “not robust” and failing to “meet standards of safe money.”


Bailey said cryptocurrencies and stablecoins fail to meet what he believes are the two foundations of safe money — singleness and finality of settlement. By this, he means:

  1. Singleness: “Wherever we hold our money – in bank accounts, notes and coins etc – we can be assured that it all has the same value – the pound in my bank account equals the pound in your account. In other words, money is exchangeable at par value” said Bailey.
  2. Finality of settlement: “Means that when we pay for something we can rest assured that it actually has been paid for.”

Back to Facts

I want to address these two points. Firstly, “Singleness”:

Of course, there will always be arguments in favour of FIAT currencies. For example, FIAT currencies are generally more widely accepted than cryptocurrencies, and they are backed by the full faith and credit of the government that issues them.

However, they are not backed by anything of intrinsic value. The value of a FIAT currency is determined by the government that issues it and can be changed at any time. Andrew’s statements are based on the assumption that FIAT currencies are a stable and reliable form of money. But if a government is in charge of setting the value of this, the pound in my bank account may not actually be equal to the pound in your account, even if they have the same face value.

In addition, central banks have a history of devaluing their currencies. This means that the value of a FIAT currency can decrease over time, even if the government does not officially change its value. This can make it difficult to save money in FIAT currencies, as the value of your savings can decrease over time.

Cryptocurrencies, on the other hand, are not subject to government control or manipulation in a direct way. They are also more secure and transparent than FIAT currencies, which are clearly documented. In my (and many others) eyes, this makes cryptocurrencies a more stable and reliable form of money in the long run.

Finally, blockchain technology has the potential to make the world a more fair and equitable place. They offer a way for people to send and receive money without the need for a bank or other financial institution. People all over the world, and especially in developing countries have access to financial services, which help reduce poverty.

And secondly, the “finality of settlement”:

Cryptocurrency transactions are irreversible. Once a transaction is confirmed on the blockchain, it cannot be reversed. This means that there is no risk of the merchant not receiving your payment, or of your payment being reversed after the fact.

Not to mention the transparency of transactions that crypto offers. The entire history of transactions is recorded on the blockchain, which is a public ledger. Meaning you can always verify that your payment has been received by the merchant and that it has not been tampered with.

Transactions are secure as they are protected by cryptography, which is a branch of mathematics that is used to encrypt and decrypt data. This means that your payment is secure from hackers and other malicious actors.

Back to Opinion

I think Mr Bailey made these comments and has his own opinion about Crypto for a few simple reasons – if the Central Bank of England loses control over monetary policy, a few things can not happen:

  • Payments cannot be frozen or confiscated. Crypto is not subject to government or financial institution interference.
  • Exchange rates or international fees don’t exist. Cryptocurrencies are borderless, meaning you can pay for goods and services from anywhere in the world without worrying about that.

But the main thing on Andrew’s mind (I think) is the weakening grip they have on people’s wealth. Cryptocurrencies are becoming increasingly popular, backed by a growing number of merchants who accept crypto payments.

Currently, central banks control the money supply by printing money and setting interest rates. If crypto becomes widely adopted, it could pose a threat to this control, as people could use digital assets to store their wealth and make payments without having to go through a central bank.

Overall, in the eyes of most central banks, the potential risks of cryptocurrencies outweigh the potential benefits. However, it is important to note that the market is still in its relative infancy, and the risks will decrease as the market matures.

Written by Karolis Kundrotas

📅 This Week in Crypto 📅

Executives in the crypto industry are still positive about the sector’s long-term prospects despite a slump in venture capital funding.  Web3 accelerator Outlier Ventures’ head of structuring and fundraising, Gvantsa Chkuaseli, said that things have already started to improve following a slowdown in the fourth quarter last year. “We can see with our own portfolio, such as Mawari’s recent $6.5 million seed round co-led by Blockchange Ventures and Decasonic, and ZINC’s $5 million Series A, that there is interest despite the challenging conditions,” Chkuaseli said.

Seasoned crypto trader Matthew Dixon recently shared his insights on the upcoming release of the Consumer Price Index (#CPI) data and how it could potentially influence the cryptocurrency market. Dixon predicts that if inflation decreases as projected, it could trigger an optimistic response from risk assets such as Bitcoin Inc. (BTC), Ethereum (ETH), XRP, and other altcoins.

Bitcoin Inc. (BTC), the world’s largest cryptocurrency by market value, could rise to $50,000 by the end of this year and up to $120,000 by end-2024, Standard Chartered Bank said in a research report on Monday. The British multinational bank increased its bitcoin price forecast from the $100,000 predicted in April. Standard Chartered said at the time that Bitcoin had the potential to reach that level because of several factors, one of them being the banking-sector crisis.