Digital Assets: Bank of England Mulling CBDC
The BoE Governor said the UK central bank was discussing the possibility of a CBDC.
Speaking to students on a webinar, Bank of England governor Andrew Bailey said the bank was considering whether a UK central bank digital currency (CBDC) was feasible. (Bloomberg)
“We are looking at the question of, should we create a Bank of England digital currency,” Bailey said Monday. “We’ll go on looking at it, as it does have huge implications on the nature of payments and society.”
However, likely, the BoE would only be able to apply its resources to the issue after the COVID-19 pandemic is passed.
“The digital currency issue will be a very big issue,” Bailey said. “I hope it is because that means COVID will be behind us.”
Sir Jon Cunliffe on CBDC
In March, Sir Jon Cunliffe, Deputy Governor Financial Stability of the Bank of England, spoke at length at the London School of Economics on the subject of money, both old and new.
His speech included comments on CBDCs.
They are a reflection of the dilemmas facing the UK’s monetary authorities, as more and more countries are veering around to at least evaluate the option of issuing CBDCs.
According to Sir Jon, CBDCs could provide benefits such as continued access by the public to a risk-free form of money, and “a more resilient, innovative and competitive payments system for UK households and businesses.”
A CBDC could also provide better utilization of central bank money and quicker transmission of monetary policy measures.
“But for all the opportunities, there are also some significant potential implications. Some of these are very similar to those I have discussed earlier about private stable coins such as the implications for the supply of credit to the economy if the role of banks changes, liquidity dynamics both in normal times and in stress, and the risk that a CBDC is too successful and becomes dominant and a single point of failure in itself,” Sir Jon commented.
In March, the Bank of England published a discussion paper on CBDC and invited responses by June 12, 2020.
“We’re interested in CBDC because this is a period of significant change in money and payments,” the BoE said.
Related Story: Global Reserve Currency: Mark Carney Pitches Crypto Replacement to U.S. Dollar
Image Credit: George Rex/Flickr
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