TL;DR Breakdown
The Bank of England has announced a four-month public consultation process on a British central bank digital currency (CBDC) that could one day replace cash and even challenge the role of private banks.
The consultation, which opens today, is seeking input from industry bodies, businesses, citizens, and other stakeholders on topics such as privacy, security, and access to CBDCs. It also aims to assess whether a digital currency could improve competition in payment markets or give people more control over their own money.
The Bank of England has been examining the feasibility of a central bank digital currency (CBDC) for some time. The Bank’s Governor, Andrew Bailey, says that a digital pound of some kind would provide a new way to pay that will be faster, cheaper, and more secure than current payments.
The consultation process will also explore the implications of a CBDC for financial stability and monetary policy, as well as for data protection and ethical issues. The Bank is also looking at the potential impact on banking competition, privacy, and the legal framework for a digital currency in Britain.
BoE deputy governor John Cunliffe stated during the treasury select committee hearing on February 28 that there is a more than 50% probability that the Bank of England will issue a CBDC, but the regulator doesn’t have the technological know-how to do this on its own. He added that the bank is looking for assistance from partners in the private sector to develop a CBDC.
The consultation period will last until mid-summer, and then the Bank of England will review the feedback and decide whether or not to launch a digital currency in Britain. The Bank of England’s executive director for payments, Chris Salmon, said that the regulator is “very conscious of the need to move quickly but carefully.”
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