At the event, which was broadcast live on Wednesday, Bank of England Governor Andrew Bailey and Deputy Director of Financial Stability Sir John Cunliffe answered questions from lawmakers at the Finance Committee. When asked about the growth of digital currency innovation in the country, Sir Cunliffe commented:
“It is very difficult to predict how innovators will actually get and spend money in the future. But we are starting to see how programmable money is being used in the cryptocurrency world. I expect we will see a similar revolution in money functions driven by technology.”
Sir John Cunliffe discusses the Convention on Biological Diversity | Source: Parliamentlive.tv
The Bank of England is currently exploring options to implement a digital pound CBDC for retail payments. The CBDC working group is also exploring the possibility of using the digital pound to distribute salaries, pensions, etc.
In support of the initiative, Sir Cunliffe points to the rapid decline in the use of cash in the UK in recent years, which has been greatly accelerated by the COVID-19 pandemic, which has impeded physical contact in transactions. An estimated 30% of transactions in the country are now done through e-commerce.
When asked about the potential demand for the CBD digital pound, Sir Cunliffe said:
“We modeled a very conservative assumption that essentially 20% of the deposits [transactions of households and firms] in the banking system can move from the banking system to central bank digital money.”
However, Sir Cunliffe acknowledged that the current state of cryptocurrency could threaten the country’s financial stability. The cryptocurrency market cap has jumped to $2.6 trillion in a very short time, with an estimated 95% of digital assets being non-banking and 5% stable. On the other side of the Atlantic, the United States has a less positive outlook because regulated private-sector hoarding coins make cryptocurrency unnecessary.