The development of a CBDC, according to a Bank of England official, would be in accordance with the central bank’s direction.
Andrew Hauser, the Bank of England’s executive director for markets, stated that the central bank’s operations would be consistent with a CBDC. It would also be the first new sort of central bank obligation in centuries, according to him. Hauser remarked ahead of a debate organized by the Federal Reserve Bank of New York, “The dog may be old, but it can still perform new tricks.”
The Bank of England already views sterling reserves held by commercial banks as a sort of digital currency. A fully functional CBDC would thus give a broader kind of public access to the system, potentially reducing the role of banks in day-to-day payments. The Bank of England has previously stated that any CBDC would have the same value as pound banknotes and would not be used to replace cash.
Hauser declared: “By themselves, balance sheet considerations do not obviously present any ‘redline’ arguments against CBDC adoption. The use of the central bank balance sheet to provide state-backed transactional money is one of our most longstanding functions.”
While the Bank of England has yet to make a public declaration regarding developing a CBDC, it did work with the Massachusetts Institute of Technology Media Lab Digital Currency Initiative earlier this year. The collaboration is focusing on the technological challenges, trade-offs, opportunities, and dangers that come with developing a CBDC system.
The Bank of England is anticipated to contemplate launching a centralized currency later this year, following encouragement from the country’s finance minister, Chancellor of the Exchequer Rishi Sunak.
Many Western central banks have been compelled to create a CBDC in order to avoid the possibility of a large tech corporation developing its own digital payment system. Concerns regarding privacy and financial stability have arisen as a result of this circumvention of the regulated banking system. Any corporation considering this, according to Hauser, should expect to be regulated to the same standards as a bank.