Bank of England (BoE) governor Andrew Bailey has cautioned people on adopting a digital pound for the United Kingdom, reports revealed.
In a Parliament Treasury Select Committee meeting, he stated he was not sure if the country currently needed a British digital pound.
He said that the Bank of England currently had a “wholesale central bank money settlement system” with further upgrades.
Bailey added the Bank of England did not plan to replace physical money with digital currencies, adding retail payment changes were not needed.
Speaking further, he said: “We have to be very clear what problem we are trying to solve here before we get carried away by the technology and the idea.”
Eurozone Crypto Euphoria
The news comes just after finance ministers in the European Union voiced support for a digital euro on Monday. Finance ministers issued a document outlining plans to back a future CBDC.
Such efforts would need further talks at the political level, it said, adding it would first need to assess environmental, privacy, cybersecurity, and other factors.
Despite the forward movement, Tony Yates, a former advisor to Britain’s central bank, said in a Financial Times article that costs and risks linked to creating CBDCs were “suspect.”
He said in his article,
“CBDC accounts may drain money from the banks, particularly during a period of heightened financial risk. This would force banks either to find new sources of funds, or shrink their loans. That could amplify tightening in financial conditions when the central bank is trying to loosen them. The central bank could respond by simply reinvesting CBDC deposits back in the banks. But would this leave us in a better place?”
Crypto Coins and CBDBs for the People
The news comes as several countries, including China, El Salvador, Venezuela, Russia, the Bahamas, Sweden, and many others have begun piloting national cryptocurrencies.
El Salvador approved legislation in 2021 to determine how it plans to use bitcoin at the national level. Shortly after, President Nayib Bukele tweeted that he backed the cryptocurrency after his country purchased several waves of Bitcoin.
Conversely, China has rolled out several test pilots of its national digital yuan, which people can use at physical and online retail stores. Locations such as Beijing, Guangzhou, and others have begun using the cryptocurrency feature. Alipay and WeChat Pay have also accommodated the CBDC with app features.
