Don’t expect the Bank of England to shield the nation’s private banks from the consequences of digital currency adoption.
“Our job is not to protect bank business models,” said Jon Cunliffe, Deputy Governor of the Bank of England, in a seminar today, per a report from Reuters. “Banks will have to adjust. Our job is to ensure that if bank business models change, we manage the financial and macroeconomic consequences of that.”
It’s a rebuke, from Cunliffe, to the banks that are expecting some sort of mediation on the part of the Bank of England—some banks have warned that as central bank digital currencies (CBDCs) are implemented globally, they could have adverse effects on commercial banks, depriving them of stable sources of funding.
The Bank of England has been demonstrating real interest over the past year in developing their own CBDC. In June, the Bank of England established a digital currency taskforce with the Bank of Canada, the Bank of Japan, the European Central Bank, the Sveriges Riksbank (Swedish central bank), the Swiss National Bank, and the Bank for International Settlements. The collective’s stated goal was to assess potential CBDC use cases, as well as consider design choices for developing technologies.
And while it appears to be in favor of CBDCs, the Bank of England has a record of skepticism when it comes to Bitcoin. Last month, the Bank’s Governor, Andrew Bailey, said that it was difficult for him to see Bitcoin as a real method of payment. Bailey has also issued warnings about Bitcoin in the past: “If you want to invest in Bitcoin, be prepared to lose all your money,” he said.
In addition to talking about the relationship between the central bank and commercial banks regarding CBDCs, Cunliffe said that politicians, too, will need to start focusing on CBDCs. “They need to go up the political agenda quite fast before the political side discovers there are developments in the private sector that actually don’t fit with policy,” said Cunliffe.
Like it or not, commercial banks may soon need to brace for the arrival of state-operated digital currencies; CBDCs remain a focal point for central banks around the world, with over 80% now reportedly interested in developing their own.
