Britcoin is not a good idea, says the City

The City has raised the alarm over Bank of England plans to allow investors to hold up to £20,000 in a so-called ‘britcoin’ digital currency – warning it could result in bank runs.

The International Regulatory Strategy Group (IRSG), a lobby group for the Square Mile, made the warning in response to a consultation launched by the Bank and the Treasury earlier this year.

It said the idea that the limits might eventually be removed altogether was also ‘very concerning’ given the recent bank runs that saw the collapse of a series of US banks and European giant Credit Suisse.

Plans for a ‘digital pound’ that could be in place by the second half of the decade were announced in a consultation launched in February.

Under the proposals, there will be an initial limit of between £10,000 and £20,000 on how much money can be held in such accounts, and they will not pay interest – designed to prevent an exodus of customers from their existing account providers.

But in its response to the consultation, the IRSG – a joint venture between TheCityUK and the City of London Corporation – became the latest to express doubts about the plan. The group welcomed the general idea of the digital pound, saying that ‘in order for the UK to remain competitive, we cannot avoid the developments in this space’.

But it said the proposed upper limit on the accounts was too high, pointing out that a European Central Bank initiative was looking at a €3,000 (£2,570) ceiling.