Bank of England Deputy Governor Jon Cunliffe today said he could see good reasons for the central bank to launch its own digital currency.
Cunliffe said the Covid crisis had accelerated the shift away from ‘public’ cash issued by the BoE and in favour of ‘private’ money used for online payments.
“We may not be there yet, but it looks probable in this country that if we want to retain public money capable of general use, and available to all citizens, the state will need to issue, public digital money,” he said in a speech to the OMFIF central banking think tank.
Last month, finance minister Rishi Sunak asked the BoE to consider creating a central bank digital currency, which he nicknamed ‘Britcoin’, to respond to the challenge from cryptocurrencies.
While banks have long been able to hold money directly with the BoE and use it for payments between themselves, the public increasingly relies on them for almost all transactions.
Cunliffe said payments infrastructure was currently at a ‘Blackberry’ stage and could easily be disrupted by an equivalent of Apple’s iPhone.
He warned that leaving innovation to the private sector risked leading to payments being dominated by one or two private firms.
The government would need to decide how much privacy there would be for a central bank digital currency.
Cunliffe said that it looked unrealistic to have a digital currency that was as anonymous as cash but did not present unacceptable security risks.