Bank of England Deputy Governor Sarah Breeden said there’s no rush to introduce a central bank digital currency for the general public because so many other developments in digital payments are underway.
Speaking to the Atlantic Council at the International Monetary Fund’s annual meeting in Bangkok, Breeden said the decision on whether to press ahead with a retail CBDC, known in the UK as “Britcoin,” would depend on “how else could we get those benefits of tokenisation and innovation.”
“Maybe we don’t need a digital pound quite so quickly,” she said, arguing that alternatives such as commercial stablecoins or tokenized deposits developed by banks could fulfill the role just as well. “Does it have to be central bank money that’s leading the way?”
Breeden’s comments suggest the BOE has chosen a wait-and-see strategy as other innovations happen within the payments system, as reported by Bloomberg earlier this year.
The BOE has been developing the option of a so-called Britcoin for several years despite opponents arguing that it could be used a form of financial surveillance. Britain’s payments system has already changed dramatically over the past 20 years as the use of cash for payments collapsed. “We’ve gone from central bank money comprising two thirds of transactions in the economy to 8%. Does that matter? Is the UK monetary system now unanchored because it doesn’t have central bank money playing as big a part?” she asked, rhetorically.
“My vision, such as it is, is definitely for a multi-money verse, where a pound of cash, a pound of central bank digital currency, if it exists, a pound in a bank account, a pound of a tokenized deposit, a pound of a stablecoin - all of those can be seamlessly interchanged at par.”
Stablecoins are tokens pegged to a currency like the dollar designed to make payments faster and cheaper, particularly across borders. Tokenized deposits allow payments to be settled seamlessly through shared digital infrastructure.
Breeden said the BOE is upgrading its internal Real Time Gross Settlement central payments system so that “our liabilities, our money, can be the settlement asset for financial market transactions in sterling.”
“That way, we can get the benefits of tokenisation, which includes 24/7 instantaneous settlement. You get all of the functionality that comes with it, but while ensuring that central bank money is the settlement asset that makes all of that happen.”
She also reiterated that the bank wants UK firms to develop successful sterling stablecoins to offer an alternative to the dollar dominance in the market.
“I don’t want citizens and businesses in the UK only to be able to access innovative payment techniques by using dollar stablecoins. That would be mad,” she said. “I want to ensure that that innovation is possible in our national currency as well.”
The bank expects three dominant sterling stablecoins to emerge, with around £40 billion of demand for each one. It is beefing up its presence as a stablecoin regulator to ensure a “singleness of money” and that “they’re integrated into the payment system, so they can be widely used as money by businesses and households.”