According to a deputy governor, the UK is not yet ready to issue a central bank digital currency (CBDC), as the Bank of England (BoE) does not have sufficient technical knowledge.
There is more than a 50% chance that the UK central bank will issue a CBDC, but the regulator does not yet have the technical know-how to issue a digital currency, BoE Deputy Governor Jon Cunliffe stated at the committee hearing. selection of the Treasury held on February 28.
Cunliffe said the Bank of England hopes to gain the necessary insights to advance CBDC development in the next phase, in which the central bank plans to test a potential digital pound with private sector partners.
“But to move to the next phase, which would be to build a working prototype, test it in a simulated environment, and then move to real-world testing and then deployment. This next phase is designed to get us up and running. conditions to do so,” declared the lieutenant governor.
Cunliffe stressed that the design and structure of a potential digital pound would vary greatly, depending on the CBDC’s motivation.. The BoE’s basic motivation in this case would likely be to provide digital cash, or the digital equivalent of BoE notes, for “general payment purposes,” he said, adding:
“We didn’t want a system where there were two forms of Bank of England money in circulation, paid and unpaid. And we also didn’t want a system where we were producing something that had the characteristics of a savings product.”
The Lieutenant Governor also highlighted some potential features and benefits of a CBDC that are currently not present in the existing financial system.
Comparing a potential digital pound to Apple’s iPhone app store, Cunliffe said a CBDC is about “opening up a new frontier for people to improve payments and the way money is used.” He mentioned micropayments as a major potential use case for a digital pound, stating:
“That will make it much, much easier to make very, very small payments. That way, if you want to read a newspaper article, you won’t have to subscribe to it. You could pay small fractions to do it.”
The news comes amid increasing UK government involvement in the development of a CBDC, with the Treasury opening a position to lead the development of a digital pound in January 2023. Previously, BoE Governor Andrew Bailey expressed doubts about the need for a CBDC any time soon, while European finance ministers once again showed support for a retail version of the digital euro.
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