CBDC introduction roadmap
The Bank of England (BOE = Central Bank) and the UK Treasury have determined that there is a high possibility that a digital pound will be required in the future, and are actively working on the introduction of a central bank digital currency (CBDC). Posted.
According to a report by British media The Telegraph on the 4th, BOE Governor Andrew Bailey and Finance Minister Jeremy Hunt said in a joint report that although it was too early to commit to building a digital pound infrastructure, they said that they would “do more.” I am confident that the preparatory work is justified.”
In 2021, when Prime Minister Rishi Sunak was Minister of Finance, he requested the BOE to investigate a CBDC and set up a task force to consider its creation. Last October, Treasury Secretary Andrew Griffiths said the UK could not evade the CBDC issue indefinitely.
A report outlining the roadmap for developing a CBDC is expected to be released this week, according to government sources. Also on the 7th, BOE Deputy Governor John Cunliffe is scheduled to speak to the financial industry about the central bank’s CBDC efforts.
The BOE and the Ministry of Finance will hold discussions over the next four months to solicit input from businesses, academic researchers and the general public on CBDC implementation.
BOE has commented that the earliest introduction of CBDC in the UK will be in the “late 2020s”, but officials predict that BOE will start building prototypes and conducting demonstration tests in 2025 at the earliest. ing. Until then, a decision on whether to actually introduce CBDC is unlikely to be made.
What are CBDCs
An abbreviation for “Central Bank Digital Currency”, it refers to a legal currency that is digitized and issued by the central bank of each country or region.While it is expected to reduce remittance costs and improve efficiency, there are many issues to consider, such as protection of personal information and privacy, security measures, and impact on the financial system.
connection:The number of central banks working on CBDC demonstration experiments is increasing worldwide = Bank of Japan report
for correct design
Economy Secretary Andrew Griffiths responded to criticism that CBDC efforts have lagged behind other countries, such as China, which have already begun piloting them.
There is indeed an important public policy question about how to proceed with the design of a national digital currency. we need to do it right. I’d rather be right than be the first.
In addition, in response to concerns that the introduction of CBDC would increase government scrutiny of individual consumption behavior, he pointed out that the UK’s CBDC model is a wholesale model targeting financial institutions and others. . He explained that private wallets will not be directly connected to the central bank, and that the CBDC will be owned by an intermediary bank.
Some oppose the introduction of CBDC
Sir Mervyn King, former Governor of the Bank of England, has been critical of the introduction of CBDCs, saying there are “risks but no clear benefits”.
King said that most transactions are already digital and that the current system operated by commercial banks and other payment instruments is sufficient. “CBDC is about a method of payment, not a new currency. Whether a country needs CBDC depends on the current state of its payment system,” he argued.
In a country without an effective banking system, the central bank may have to intervene, but clearly not in the UK.
Officials say building a CBDC will take several years and involve a “significant public investment.”
Will it lead to the abolition of cash?
With the digitization of payments such as credit cards and payment apps progressing, the use of cash in the UK, which accounted for more than half 10 years ago, has fallen to about 15%. The move to introduce CBDCs has also led to fears that cash will be phased out.
On the other hand, BOE stresses that CBDC will coexist with cash, not replace it. The UK government also passed new legislation last year to protect access to cash and gave the Financial Conduct Authority (FCA) new powers to ensure the continued availability of cash deposits and withdrawals in communities across the country. Granted.
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