Bank of England views CBDCs as the future of money

Bank of England views CBDCs as the future of money


A live stream event by Bank of England on November 24 saw the Bank Governor, Andrew Bailey and Deputy Governor, Sir Jon Cunliffe, answering questions from various lawmakers in the Economic Affairs Committee. 



The governors for financial stability, when asked about the growth of innovation in the country’s digital currencies sphere, Sir Cunliffe, said that it is “quite difficult” predicting how innovators would make money as well as if they can actually use the money going forward. However, the bank is starting to witness “programmable money” being used gradually in the crypto world. 



Cunliffe said he would expect seeing a “similar revolution in the functionality of money driven by technology.”



The Bank of England has been reported to have currently been exploring options for implementing a digital pound CBDC for retail payments. A task force has been appointed behind the CBDC that is simultaneously investigating the usage of a digital pound for distributing payrolls, pensions, etc.



Sir Cunliffe has also cited the rapidly declining usage of cash money in the United Kingdom in the recent years, noting that this was greatly accelerated during the ongoing COVID-19 pandemic that discouraged the public from any source of physical contact, including transactions. 



An estimated 30 per cent of the total transactions in the UK now occur via e-commerce, Cunliffe highlighted.



Speaking about the potential demand of a digital pound CBDC, Cunliffe detailed that the bank has modelled “a very prudent assumption” which is that almost 20 per cent of [household and corporate transactional] deposits that are based in the traditional banking system could move out of it, shifting to the central bank digital money.



Cunliffe also admitted that the current state of crypto affairs has the potential to threaten financial stability in the country. 



The market cap on cryptocurrencies has notedly surged to $2.6 trillion in a very short span of time, with an estimated 95 per cent of digital assets being unbanked and 5 per cent consisting of stablecoins. 



However, on the opposite side, in the United States, they have a less of a positive outlook that implies regulated stablecoins that are being designed by the private sector make CBDCs redundant.

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