A digital currency is likely to be needed, says U.K. Treasury and Bank of England
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The U.K. government said Monday that a digital currency is likely needed, as countries around the world examine the changing nature of payments.
A statement issued by both the U.K. Treasury and the Bank of England said they were seeking comments, though they said no decision has yet to be taken. The consultation will run through early June, and a decision about whether to implement a digital pound will be taken around the middle of the decade. The earliest stage at which the digital pound could be launched would be the second half of the decade.
The financial authorities said they envision a digital pound as having equivalent value to existing cash.
“As the world around us and the way we pay for things becomes more digitalized, the case for a digital pound in the future continues to grow. A digital pound would provide a new way to pay, help businesses, maintain trust in money and better protect financial stability,” said Bank of England Gov. Andrew Bailey in a statement. U.K. Chancellor of the Exchequer Jeremy Hunt made a similar comment.
The authorities said a digital pound would be issued by the Bank of England, and that neither the government nor the central bank would have access to personal data. It would be accessed through digital wallets offered to consumers by the private sector through smartphones or smartcards.
Other countries including the U.S. are considering similar proposals, though the Federal Reserve officials have expressed skepticism around the idea though they continue to study it. Fed Gov. Christopher Waller said the dollar’s role as the dominant currency has little to do with technology.
“A U.S. [central bank digital currency] is unlikely to dramatically reshape the liquidity or depth of U.S. capital markets. It is unlikely to affect the openness of the U.S. economy, reconfigure trust in U.S. institutions, or deepen America’s commitment to the rule of law,” said Waller in a speech in October.
That said, the New York Fed has been testing central bank wholesale digital money with institutions including BNY Mellon, Citi and Mastercard.
Two-thirds of central bank respondents to a survey conducted by the Official Monetary and Financial Institutions Forum found they expect to issue a central bank digital currency in ten years. Benefits include a broadening of access to financial services and improving cross-border payments, the survey found.
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