• Andrew Bailey, the Bank of England governor, has shared his thoughts on the idea of the country’s central bank digital currency (CBDC) – the digital pound.
• Bailey believes that there might be no need for a wholesale CBDC as the country already enjoys a „wholesale central bank money settlement system with a major upgrade.“
• He believes that changing retail payments now will only amount to a misplacement of priorities, as there is no conviction that retail payments need any upgrades at the moment.
The Bank of England (BoE) is showing signs of backing away from the idea of a digital pound. This comes as the digital euro receives a major boost from the European Central Bank, with plans to launch a public consultation on the matter in 2021.
The BoE governor, Andrew Bailey, recently shared his thoughts on the idea of a central bank digital currency (CBDC). According to Bailey, there may be no need for a wholesale CBDC, as the country already enjoys a „wholesale central bank money settlement system with a major upgrade.“ He believes that changing retail payments now would amount to a misplacement of priorities, as there is no conviction that retail payments need any upgrades at the moment.
Several nations trying to adopt CBDCs have maintained that digital currencies should only complement cash rather than outrightly replace them. This is in line with the BoE’s stance on the matter. Bailey has made it clear that the country is not in any way trying to abolish the retail use of cash. He stated that the priority should be to focus on problems that can be solved with the help of a digital currency, such as payments efficiency, access to financial services, and financial inclusion.
The BoE has been conducting research and trials on the concept of a digital pound since 2018. However, the bank has yet to make any concrete plans to launch a CBDC. This is in contrast to the European Central Bank, which recently announced plans for a public consultation on the digital euro project.
The development of a digital currency poses many challenges, both technologically and legally. It remains to be seen whether the Bank of England will continue to pursue the idea of a digital pound. For now, the bank appears to be taking a wait-and-see approach, while keeping an open mind to potential opportunities that may arise from the development of a digital currency.