Britcoin could ‘open a new frontier’ in payments, says BoE official
A central bank digital currency (CBDC) could “open a new frontier” in payments and even make the financial system more stable, the deputy governor at the Bank of England said today.
Speaking to MPs at a Treasury Committee hearing, deputy governor Jon Cunliffe said a so-called digital pound “could have huge benefits for the economy and for society.”
Cunliffe stressed the benefit of a CBDC was not about any one particular aspect, saying “this is about opening a new frontier for people to improve payments.”
Cunliffe said CBDC could improve payment options in a variety of different ways.
“We can configure payments to an extent now, but it’s quite clunky and they’re quite blunt instruments, whereas programmable money would enable much more differentiation and variation,” Cunliffe said.
Concerns have been raised, however, that a CBDC in the UK, which has been dubbed ‘Britcoin’, could make bank runs more likely as consumers are able to easily transfer money out of consumer bank accounts into a CBDC.
While the Bank has already proposed a theoretical limit on transfers of a potential CBDC between £10,000 and £20,000, Cunliffe said that a digital pound has “financial stability benefits” despite the risks.
“It provides another payments system in terms of resilience but it also means if we have to deal with failed banks again, there’s another asset people can go into,” Cunliffe said.
Providing another secure asset increases the security of customer deposits by allowing people to move their money out of failed banks.
“The answer to this problem is not to say if there’s a complete loss of confidence in the banking system we’ll just close the exits,” he said.
One of the main drivers for a CBDC has been the declining use of cash, but Cunliffe denied that CBDCs would hasten its decline further.
Cunliffe said he thought the use of cash would continue to decline as online shopping becomes more prevalent and fewer outlets accept cash to cut their own costs.
“Cash will decline not because digital options are created. Cash will decline because it’s not usable, and then digital options will be created,” he said.
However, Cunliffe said cash will have “a long tail” and confirmed the bank would continue supplying it as long as people need it.
The consultation on the digital pound will run for four months before the project will enter the design phase. A final decision is expected to be made in 2025.