The Bank of England may be forced to revive its digital pound plans to maintain control over the UK’s monetary system. Bailey says this could happen if a widely used stablecoin from a major tech firm threatens financial stability.
Bank of England's digital pound loses momentum as CBDC benefits diminish
Source Cryptopolitan
The Bank of England (BoE) is rethinking its plan to create a digital pound. Officials now believe the benefits of launching this new currency are getting smaller because today’s payment systems are improving fast and meeting most consumer needs.
The central bank once backed the digital pound but now tells banks to upgrade their own payment systems. It believes private solutions from banks can deliver the same benefits without a government-backed digital coin.
Bank of England tells banks to lead payment upgrades as digital pound stalls
The Bank of England asks banks to improve their digital payment systems faster instead of waiting for a government-backed digital pound.
BoE now sees fewer reasons to push forward with its digital currency for the public, as officials believe that banks can create modern solutions like tokenized deposits and better electronic payments to provide the same benefits of a digital pound.
Governor of the Bank of England, Andrew Bailey, said there is no need for a government-issued digital pound because most people already use reliable and fast digital payment options in their daily lives.
The Bank of England’s research into its staff also found that the benefits of creating a central bank digital currency, or CBDC, are much smaller now than before. BoE and the UK Treasury will decide whether to continue or stop the project once the current design phase is completed. But most signs suggest they are preparing to step back instead of moving forward with a full launch.
The recent change in leadership involvement is another clear sign that the digital pound project has lost momentum.
Senior officials like Deputy Governor Sarah Breeden and Gwyneth Nurse from the Treasury led important meetings about the digital pound at its earlier stages. However, they have moved away from managing the project directly during the most recent CBDC Engagement Forum meeting.
Top leaders are focusing less on the project as it enters a more technical phase and are instead sending lower-level staff to handle discussions with banks and researchers.
Countries stop digital money plans as private payments grow faster
The Bank of England is rethinking its digital pound project, following a global trend where central banks quietly drop their plans for digital currencies. For example, the Trump administration stopped work on a digital US dollar, saying it could harm the country’s financial stability.
South Korea’s central bank ended its digital currency pilot after testing, saying the risks were too high compared to the benefits. However, some central banks still see digital currency as the key to their future payment systems and keep investing in it. For example, the European Central Bank is still working on plans to launch a digital euro.
This difference makes the UK’s careful approach even clearer. While the European Central Bank moves forward with its digital euro plans, the Bank of England questions if a digital pound is needed, as private companies keep building better payment technologies.
People in the UK are uncomfortable with state-controlled digital payments because they say a digital pound could track how individuals spend their money. Officials also worry that a state-backed digital dollar could cause chaos if people rush to move their money out of banks during a crisis, weakening the country’s financial safety net.
More than 50,000 people expressed anxieties in the UK when the Bank of England solicited public opinion. Some groups fomented conspiracy theories and false claims about the government’s intentions, undermining public confidence in a form of digital currency. Even as the Bank pulls back from creating a digital pound, Governor Andrew Bailey is wary of risks from other digital money.
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