The executive director for markets of the UK central bank, Bank of England (BoE), Andrew Hauser has hinted that there is no ‘Red Line’ against the central bank digital currency (CBDC).
A central bank digital currency (CBDC) would not be too big a struggle for the BoE’s operations, Hauser said on Wednesday.
The BoE is still in discussions about whether it should create its own digital currency. Discussions of a competitor to cryptos like Bitcoin started after finance minister Rishi Sunak supported the idea of a possible ‘Britcoin’.
Hauser stated that a CBDC would be the first new type of central bank liability in centuries, but not one that was conflicting with the BoE’s aims.
“The dog may be old, but it can still perform new tricks,” Hauser said prior to a discussion to be hosted by New York’s Federal Reserve Bank.
“By themselves, balance sheet considerations do not obviously present any ‘red line’ arguments against CBDC adoption. The use of the central bank balance sheet to provide state-backed transactional money is one of our most long standing functions,” Hauser added.
The BoE has explained that no CBDC would replace cash and would be equivalent in value to sterling banknotes.
Also Read: CBDCs will Kill the Existence of Private Crypto: RBI Deputy Governor
The BoE views the sterling reserves held by commercial banks, as a type of digital currency, and a fully-fledged CBDC as a wider form of public access to this system, potentially cutting banks’ role in daily payments.
Western central banks’ attraction towards CBDCs is motivated by the possibility that a tech giant firm might create its own form of payment. This could bypass the current banking system, raising concerns about privacy as well as financial stability.
If a company decided to go down this route, it must expect to be regulated to the same standards as a bank, Hauser said. Already existing ‘stablecoins’ did not meet these standards, he added.
“Holders of such coins must accept at least the possibility of finding themselves badly out of pocket,” Hauser said, in regards to the recent collapse of TerraUSD and a temporary dip in the price of the more widely used Tether.
It is uncertain of what the UK government is planning to do next for CBDCs. However, it was revealed by the Bank of International Settlements that 90% of Surveyed Central Banks are Interested in CBDC. So it is a possibility that the BoE will roll out CBDCs too.