As Britain witnesses a strong surge in the use of digital money, the BoE deputy governor believes that having a Digital Pound CBDC can exactly cater to this transition.
On Wednesday, November 24, in a live streaming event, Bank of England governor Andrew Bailey and deputy governor for financial stability Sir Jon Cunliffe addressed some questions coming from the Economic Affairs Committee.
The committee touched upon one of the most interesting topics that are the growth of innovation surrounding digital currencies. Commenting on this matter, Sir Cunliffe said:
“It’s quite difficult to predict how innovators will take money and actually use money going forward. But we are starting to see programmable money being used in the crypto world. And I would expect we would see a similar revolution in the functionality of money driven by technology.”
Alike several other central banks, the Bank of England is also exploring the option of introducing CBDCs. Thus, the central bank is considering the option to introduce Digital Pound for retail payments. The Bank of England is also exploring other use cases doe digital Pound such as distributing payrolls, pensions, etc. As a result, the central bank has set up a task force for CBDC to look after all these matters.
The Move Towards Digital Money
During the live streaming call on Wednesday, Sir Cunliffe cited the rapid decline in the use of cash in the United Kingdom in recent years. He acknowledged it has further accelerated by the advent of the COVID-19 pandemic that discourages in-person physical transactions.
He further noted that an estimated 30% of the transactions in the country now occur via e-commerce. Explaining the potential demand of the Digital Pound, Sir Cunliffe said:
“We’ve modeled a very prudent assumption, which is that basically 20% of [household and corporate transactional] deposits based in the banking system could move out of the banking system and into central bank digital money.”
Although Sir Cunliffe remains positive about the use of the Digital Pound, he also showered fresh criticism on the crypto market. Last month, he said that the use of cryptocurrencies can lead to a potential financial crisis. His assumption is based on the rapid growth of the crypto market in a very short time period and without regulation. In just five years, the crypto industry has exploded from $16 billion to now at $2.5 trillion.
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