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Citi Persuaded that Digital Money is Inevitable, Encourages U.K. Government to Create its Own

Op-ed - Citi Persuaded that Digital Money is Inevitable

In March, after receiving more than 120 replies to a call for information on digital currencies, the U.K. government released a Treasury document titled “Digital Currencies: Response to the Call for Information,” which summarizes the submissions received and outlines the government’s views and proposed next steps. In particular, the government is launching a £10 million (U.S. $14.6 million) research initiative on digital currencies.

One of the replies to the U.K. government call for information came from the global bank Citi. The bank is persuaded that digital money adoption is inevitable, and the U.K. government should consider issuing its own digital money, Finextrareports. The full text of the Citi document was obtained by CoinDesk via a Freedom of Information request.

Headquartered in Manhattan, Citi is an American multinational banking and financial services corporation. As of January 2015, it is the third-largest bank holding company in the United States by assets and has one of the world’s largest financial services networks.

“Due to the potential benefits, we believe the adoption of Digital Money is inevitable,” notes the Citi document. “While we believe that the use of Digital Money is certain, the future of specific cryptocurrencies such as Bitcoin is less clear.”

The wording shows that Citi agrees with the growing persuasion, in the financial and regulatory sectors, that the promising blockchain technology will eventually have to be adapted to non-Bitcoin blockchains with different features, more appealing to the financial mainstream.

Recently the Bank of England itself called for further research to devise a system that could use distributed ledger technology without compromising a central bank’s ability to control its currency. Similar ideas were discussed at a research workshop organized by the European Commission.

“The greatest benefits of digital currencies can be realized through the government issuing a digital form of legal tender,” notes the Citi document. “This currency would be less expensive, more efficient, and provide greater transparency than current physical legal tender or electronic methods.”

Citi recommends that the U.K. government work together with regulators in other nations to establish a common platform, if possible, within the framework of existing regulations and laws.

“The decision by a government to issue its own digital money would resolve the majority of national AML, KYC and sanctions concerns,” adds the Citi document. “Clearly this creates possible privacy concerns on the side of the citizen, but it could be offset by the additional value digital money provides.”

The idea of a government-sponsored digital currency has been around for quite some time. In February, David Andolfatto, vice president of the Federal Reserve Bank of St. Louis, wrote a blog post about “Fedcoin: On the Desirability of a Government Cryptocurrency.” Similarly, Greece’s Finance Minister Yanis Varoufakis envisaged some kind of “Eurocoin” for Europe, especially for financially troubled economies such as Greece’s.

One thing is certain: Governments and established financial institutions risk obsolescence if they don’t act soon.

“We believe that Governments and the Financial Industry incumbents are not currently leveraging the benefits of emerging technologies and risk similar challenges to that of the Post Office during the shift to digital forms of communication,” warns Citi.

Photo Uris / CC BY-SA 3.0