According to a deputy governor, the United Kingdom is not ready to issue a central bank digital currency (CBDC) just yet, as the Bank of England (BoE) doesn’t have enough expertise.
There is more than a 50% chance that the central bank of the United Kingdom would issue a CBDC, but the regulator doesn’t have the technical skills to issue a digital currency yet, BoE deputy governor Jon Cunliffe declared at the treasury select committee hearing on Feb. 28.
Cunliffe said that the BoE expects to get the necessary expertise to move forward with the CBDC development in the next phase, with the central bank planning to test a potential digital pound with private sector partners.
“But to move to the next stage, which would be to build a working prototype, to test in a simulated environment and then you’d be into testing in a live environment, then implementation. This next phase is designed to put us in a position to do that,” the deputy governor stated.
Cunliffe stressed that the design and structure of a potential digital pound would vary greatly, depending on the motivation of the CBDC. BoE’s basic motivation here would likely be providing digital cash, or the digital equivalent of BoE notes, for “general payment purposes,” he said, adding:
“We didn’t want a system in which there were two forms of Bank of England money circulating, remunerated and unremunerated. And also, we didn’t want a system where we would be producing something which would have the characteristics of a savings product.”
The deputy governor also highlighted some potential CBDC functions and benefits currently not present in the existing financial system.
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Comparing a potential digital pound with Apple’s iPhone app store, Cunliffe said that a CBDC is about “opening a new frontier for people to improve payments and the way in which money is used.” He mentioned micropayments as a major potential use case for a digital pound, stating:
“This will be much, much easier for you to make very, very small payments. So if you wanted to read an article in a newspaper, you wouldn’t have to subscribe to the newspaper. You could pay tiny fractions to do that.”
The news comes amid the U.K. government growing increasingly involved in the CBDC development, with the Treasury opening a position to lead the development of a digital pound in January 2023. Previously, BoE governor Andrew Bailey reportedly expressed doubts about the necessity of a CBDC in the short term, while European finance ministers once again showed support for a retail version of the digital euro.