BOE’s Bailey Raises Doubts Over Digital Pound for Consumers
Bank of England Governor Andrew Bailey cast doubt on the need for a digital pound for consumers, calling into question whether the UK will push ahead with its plans.
Bailey said on Friday he is not yet “convinced that we need to create new forms of money” to benefit from technological advances in payments, such as smart contracts and fraud-fighting measures.
It was one of the strongest signals yet from the Governor that there are major doubts among UK officials over whether to push ahead with so-called “Britcoin” for consumers. Bailey was addressing a conference in Kyiv, Ukraine, in which he spoke of his “awe” for the country’s central bank and people in the face of Russia’s invasion.
The central bank has faced a raft of concerns from the public, banking sector and lawmakers since it started work on developing a digital pound.
The BOE is currently at the design stage of its retail central bank digital currency and lags behind other jurisdictions in creating one. Alongside the UK Treasury, it is yet to make a final decision on whether to build a digital pound aimed at households.
Bailey said the BOE is “well on the way” with creating wholesale central bank digital money used for transactions between financial institutions. However, he added to doubts over the accompanying project aimed at everyday consumers.
“I start with the presumption that there should be benefit here – it seems like a failure of imagination if we think otherwise,” said Bailey. “That said, I remain to be convinced that we need to create new forms of money – such as Central Bank Retail Digital Currency – to achieve this.”
Officials have sought to quell privacy and security concerns over the digital pound. A consultation on the project received over 50,000 responses and central bank digital currencies have attracted the attention of conspiracy theorists. Banks are also worried about consumers rushing into a safe, state-backed digital currencies at times of crisis, calling for a lower deposit limit.
UK officials said the digital pound will not replace cash and will not include government programmable functions, which critics said could be used to determine how consumers spend money or state benefits.
It has also received criticism from the House of Lords Economic Affairs Committee, which said there are “significant risks and challenges.”
“It is not clear to us at this stage whether the benefits are likely to outweigh these risks,” peers said in a report published in 2023.
In his speech Friday, Bailey also questioned whether governments have put too much regulation on banks, moving risks to other parts of the financial system.
He asked “whether we have over-protected the banking system via excessive regulation, and in so doing pushed more risk into non-banks which would be more safely housed in banks.”
“Put another way, have we increased overall financial stability risk by raising the bar too high in banks?,” he said. “It’s a fair enough question, but intrinsically hard to answer.”
Source : Bloomberg
