BoE chief questions the case for a digital pound

The UK authorities must “clearly understand” what problems the national digital currency (CBDC) will address before embarking on its development. This view was expressed by Bank of England Governor Andrew Bailey, Reuters reports.

In the coming weeks, public consultations on the legal attributes of the digital pound will begin. Appearing before a parliamentary committee on 16 January, Bailey questioned the need for creating a CBDC. In his view, the country already has an effective wholesale payments system.

“I think the question of whether a wholesale central bank digital currency is needed remains open,” he said.

He added that he remains cautious about CBDC as a tool for use in retail. Bailey noted there are no plans to phase out cash.

“We must be very clear about the problem we are trying to solve before we get carried away by the technology and the idea,” he said.

Earlier, EU finance ministers backed further work on the digital euro. In their view, the CBDC “should be a pan-European and inclusive project,” and should also complement rather than replace cash.

“Depending on its design, the digital euro could play a key role in an increasingly digital economy […], while preserving the role of central bank money as an anchor for our monetary system,” the statement says.

The ЕЦБ Governing Council will study the CBDC study results in autumn 2023, after which it will decide whether to proceed to the implementation phase.

In November 2022, ECB President Christine Lagarde said that the digital euro will eliminate the risks of losing financial sovereignty in the euro area.

In April 2021, the Bank of England and Her Majesty’s Treasury created a joint working group to study CBDC. Later in the process the Lords’ Economic Affairs Committee joined.

According to a survey, only 24% of Britons supported the rollout of the digital pound. The greatest concerns among the public were the threat of hacking and privacy violations.

In February 2022, the Bank of England said that the retail wallet for CBDC was ‘unlikely’.

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