Andrew Hauser, executive director at the BoE (Bank of England), has acknowledged the prospect of a CBDC. The official believes a CBDC is compatible with the operations of the bank. Also, Hauser stated that a CDBC would be the latest liability issued by the BoE in centuries. He added that;
“The BoE might be old but financial institution can perform modern operations.”
Sterling Reserves Are Digital Currencies
All Commercial banks in England have what is called sterling reserves. The country’s central bank considers these reserves as a kind of virtual currency.
As a result, issuing a CBDC will provide public access to these reserves. In addition, it will reduce the role of banks in everyday transactions. Previously, the central bank stated that a potential CBDC would have the same value as fiat.
“The balance sheet of the country’s central bank has no redline against CBDC usage. On the contrary, it can support it. This is because the BoE’s balance sheet can be used to provide a state-issued transactional money,” he added.
CBDC Consideration By BoE
At the start of 2022, the central bank partnered with the Massachusetts Institute of Technology (MIT) Media Lab Digital Currency Initiative (DCI).
Both entities will look at opportunities, risks, trade-offs, and potential challenges. In addition, the partnership is to explore the prospects of a CBDC in the country.
Meanwhile, the central bank has not made an official announcement on CBDC development. The finance minister of England, Rishi Sunak, has encouraged the BoE to issue a “Britcoin.” Therefore, the BoE may issue a centralized digital currency before the end of 2022.
Presently, many central banks in the West have embraced the idea of a CBDC. Countries like China have been running pilot tests on the new financial asset. Countries like the US and UK are still on the fence regarding CBDC adoption.
However, most banks are planning to develop a digital currency for personal reasons. They do not want a digital currency to gain massive adoption over the country’s fiat.
For instance, the US has been fighting to ensure that Bitcoin does not devalue the Dollar. Hauser noted that tech firms that want to create digital currencies should be regulated.
In addition, they will be regulated the same way as banks. This is to ensure that customers’ privacy and the fund are protected. Furthermore, it will reduce the chances of financial instability.