Bank Of England: CBDCs Could Revolutionize The Future Of Money

Bank of England governor Andrew Bailey and deputy governor for financial stability Sir Jon Cunliffe in a live stream answered questions from lawmakers from the Economic Affairs Committee.

Regarding the growth of innovation surrounding digital currencies in the country, 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.”

The Bank of England is currently looking into various options to implement a CBDC for retail payments. A task force behind the CBDC is also investigating the use of a digital pound for distributing payrolls, pensions, etc.

Sir Cunliffe is in favor of the initiative and refers to the rapidly declining use of cash in the United Kingdom in recent years, which has greatly been accelerated by the COVID-19 pandemic discouraging physical contact in money transactions. According to an estimate 30% of transactions in U.K. now take place via e-commerce.

Regarding the potential demand of a digital pound CBDC, Sir Cunliffe said:

“We’ve modeled a very prudent assumption, which is that basically 20% of deposits based in the banking system could move out of the banking system and into central bank digital money.”

Sir Cunliffe also said that the current state of crypto could potentially threaten financial stability in the U.K. The market cap on cryptocurrencies has surged to $2.6 trillion in a very short time, with an estimated 95% of digital assets being unbanked and 5% consisting of stablecoins.

United States has less of a positive outlook, saying that regulated stablecoins designed by the private sector make CBDCs redundant.