The chief cashier of Bank of England (BoE) has expressed support for the central bank digital currency (CBDC). She urged other central banks to consider developing CBDC in response to recent moves by private companies in the digital payments sector.
25 February, 2020 | AtoZ Markets – More and more countries are embracing the idea of issuing their own central bank digital currencies (CBDCs). For example, Japan continues its digital yen plans to counter threats from China.
Meanwhile, the Bank of England's chief cashier is in favor of the digital pound. Nevertheless, there has been no official confirmation from the Bank of England regarding the issue of a digital pound. However, the argument grows that the UK needs to take action to counter the effects of the giant tech companies and CBDCs.
Central Banks Should Consider CBDC
According to the BoE chief cashier Sarah John, it was "crucial" for central banks to research digital currencies to balance private issuers.
She said it is "really important" for the BoE and other central banks to consider whether digital currencies can form the basis of a new payment system. If so, "speed up" to determine how to regulate the new asset class.
The BoE needs to reflect on its position on technology. It has to ensure that the UK has "a wide range of payments that it can use with confidence". John is responsible for issuing banknotes and said:
Central banks have to think about whether the public or private sector would be best able to provide digital currency in the future.
Furthermore, the BoE is one of seven financial institutions that co-founded a new task force in January. The task force shares research and results on central bank digital currencies. Recently, BoE Governor Mark Carney spoke out loud about the challenge of a global digital alternative to the dollar as the world's reserve currency. Bank of Japan Governor Haruhiko Kuroda also said:
"We are advancing research and studies from a technical and legal point of view so that we can act appropriately when the need arises."
Central Banks Must Quicken the Pace
John said it is vital that central banks strike the right balance on healthy private sector participation. She also urged the Bank to act quickly to ensure future monetary and financial stability. Central banks also determine how to define the role of private companies issuing their own cryptocurrencies in the future, such as Facebook's involvement in the Libra project.
John is not the only one worried about the growing threat posed by technology companies and private sector participation. The Financial Stability Board (FSB) also warned that authorities must "speed up" the development of regulations.
Fortunately for central banks, they seem to have the advantage when it comes to consumer confidence. According to an Ipsos Mori survey, central banks are the most reliable institutions for issuing digital currencies. The survey also reveals that technology companies are the least reliable.
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