Bank of England warns of digital currency rollout if banks lag
The Bank of England (BOE) is preparing for the possibility of launching a central bank digital currency (CBDC) if commercial banks fail to innovate in digital payments.
In a recent speech at the Group of Thirty’s Annual International Banking Seminar, BOE Governor Andrew Bailey emphasised the need for advancements in cross-border and wholesale payments to improve efficiency, reduce costs, and increase transparency.
Bailey expressed his preference for commercial banks to lead these innovations, particularly in retail payments.
However, he cautioned that if private-sector efforts stagnate, the BOE must be ready to step in.
"If for some reason innovation is unlikely to happen, then the central banks have to decide whether they are the only game in town,” Bailey stated.
He highlighted the importance of preparing for a retail CBDC as a contingency plan, noting that current progress in the commercial sector may not be sufficient.
The BOE is closely monitoring developments in payment technologies and evolving user preferences to determine whether commercial banks can keep pace.
Bailey explained, “For commercial bank money to function effectively, it must keep pace with the needs of its users. Our work on retail CBDC is considering these trends in the payments landscape closely.”
While Bailey made it clear that his preferred outcome is for commercial banks to drive innovation, he acknowledged that central banks must be ready to act if the private sector falls short.
He emphasised the BOE’s role in encouraging advancements and supporting the development of new payment solutions, stating, “We should be thoroughly engaged to encourage, and if necessary, provide such innovation.”
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