Cunliffe addressed the need for “public money”, which the bank has been issuing for more than 300 years. Photo: BEN STANSALL/AFP via Getty Images
The UK will likely have to issue its own digital currency to “meet the needs of modern day life,” a top Bank of England (BOE) official has said.
Sir Jon Cunliffe, deputy governor for financial stability at the Bank of England, said new technologies like stablecoins — a form of crypto-assets — could transform money and shift people away from cash.
“Having watched the digital transformation of other parts of the economy, one would not bet against the next wave of technology leading to further major transformation,” he said. “We could now, in payments, be in a ‘Blackberry’ world about to see the introduction of the ‘iPhone’.”
It came as Cunliffe addressed the need for public money to keep up with the innovations happening in the private market.
“We may not be there yet,” he said in a speech on Thursday. “But it looks probable in the UK that if we want to retain public money capable of general use and available to citizens, the state will need to issue public digital money that can meet the needs of modern day life.”
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The BOE and the UK Treasury said last month they were exploring a potential national digital currency, amid a groundswell of interest.
Dubbed “Britcoin” by the press, the BOE has previously said any UK digital currency would be a new form of digital money that could be used by both households and businesses.
Interest in central bank digital currencies — often abbreviated to just CBDC – has evolved from the growth of decentralised digital currencies such as bitcoin (BTC-USD) and ethereum (ETH-USD), which have taken markets by storm.
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Last year, the coronavirus crisis exacerbated a longterm shift away from cash and towards digital payments. A recent BOE survey found that 70% of respondents were using less cash than prior to the pandemic.
“The pandemic and consequent huge forced experiment in remote living, working and transacting has, at least temporarily, accelerated these trends,” Cunliffe said.
“We do not, of course, know how persistent these changes will be when we emerge from the pandemic. I think, however, that it is a relatively safe bet that the experience of the last 12 months will lead to further acceleration of the move from physical to electronic/digital money and with it a shift from public to private money.”
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The Bank of England has said any CBDC would be a new form of digital money that would exist alongside cash and bank deposits, rather than replacing them. The central bank has committed to maintaining access to cash despite the decline in use.
“I do not think that demand for cash will entirely disappear any time soon,” Cunliffe said. “Many still rely on it for a number of reasons.
“But cash, and by extension public money, is becoming an ever smaller fraction of the money we use in the UK and increasingly unusable in a digital world.”
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