The blockchain revolution has been gaining traction in the finance sector, with more than 100 countries exploring the potential of Central Bank Digital Currencies (CBDCs). The Bank of England and HM Treasury made their plans to introduce a ‘digital pound’ as a cryptocurrency alternative for households and businesses official earlier in the month. Now, a top official at the Bank of England (BoE) has further emphasized that new technologies such as digital currencies could provide profitable opportunities for businesses.
Ben Broadbent, BoE Deputy Governor for Monetary Policy, declared that the BoE was paying close attention to how emerging technologies in payments could be regulated, and commented on the upcoming Bank of England CBDC.
“The experience of digitalization so far is that new products and services enabled by new technologies can be adopted very rapidly at scale. This obviously brings opportunities for financial institutions, businesses, for individuals. We would expect to see continued improvements, reductions in friction and cost of payment,” said Broadbent at a BOE research conference.
Central Bank Digital Currency development in the UK:
Project Rosalind: currently developing prototypes for an application programming interface to distribute retail CBDC. A joint experimentation programme with the UK Government & Bank of England.#CBDCs pic.twitter.com/qJvCXSU4sq
— James Melville (@JamesMelville) February 21, 2023
An official consultation paper concerning the Bank of England’s CBDC was released earlier in the month as well, which outlines its different facets. Essentially, as the paper noted, the currency would be backed by central bank reserves and “sit alongside, not replace, cash” to “ensure that central bank money remains available and useful in an ever more digital economy.”
The British CBDC project, which has been nicknamed the “Britcoin,” would join the 30% of nations exploring a CBDC that are in the development stage. The Atlantic Council’s CBDC tracker notes that the roughly the same percentage of countries are at the research stage.
Broadbent has also stressed the importance of exploring new payment technologies and how they may be used, saying “We must remain open-minded about future developments, such as CBDCs or other digital forms of money, given their potential benefits but also risks.”
Meanwhile, BoE Deputy Governor Jon Cunliffe proposed at a February 28 Parliament’s Treasury Committee meeting that the Bank of England’s CBDC could also protect customers from potential banking system failures, further supporting the bank’s impetus for launching its digital currency.
Cunliffe said that with the dawn of the “era of instantaneous bank runs,” customers can now move their money to another institution at a moment’s notice if they become anxious about one particular bank’s solvency.
However, he noted that although the Bank of England’s CBDC may “intensify” a bank run through enabling much faster transfers of money, it would also give users a “safe place” to store their money outside of any one bank.
“Actually, a CBDC has financial stability benefits because it provides another payment system in terms of resilience, but it also means that if we ever have to deal with failed banks again, there is another asset that people can go into,” said Cunliffe.
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