The Governor of the Bank of England, Andrew Bailey, has questioned the need for a digital pound, just as finance ministers from the eurozone backed further preparatory work on a digital euro. Britain is set to launch a public consultation in the coming weeks on the legal attributes of a digital pound, which supporters argue would lead to faster transactions.
During a meeting of parliament’s Treasury Select Committee on Monday, Bailey stated that he was not sure if a digital pound was needed at this time. He noted that the Bank of England is currently in the process of updating its real-time gross settlement system (RTGS), which holds the accounts of Britain’s banks, building societies, and other institutions at the bank.
“I think it’s an open question whether a wholesale digital central bank currency is needed because we’ve got a wholesale central bank money settlement system with a major upgrade,” Bailey said. He also expressed caution about a digital pound for retail use, such as for making payments, and emphasized that there is no plan to abolish cash. “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,” he said.
In contrast, finance ministers from the eurozone announced on Monday that they backed continued preparatory work for a potential digital euro, which is currently being studied by the European Central Bank. The EU plans to publish a draft law this year on how a digital euro would fit into the bloc’s laws.
In a joint statement, the ministers said, “The Eurogroup considers that the introduction of a digital euro, as well as its main features and design choices, requires political decisions that should be discussed and taken at the political level.” They also emphasized that a digital euro should complement, rather than replace, cash and that an “offline functionality” should be explored to serve a wider range of uses and contribute to financial inclusion.
In conclusion, while the eurozone moves forward with plans for a digital euro, the Governor of the Bank of England remains skeptical about the need for a digital pound, at least for now. He believes that the current system, which is undergoing a major upgrade, may be sufficient to meet the needs of the financial system. However, the public consultation on the legal attributes of a digital pound is still set to launch in the coming weeks, and it will be interesting to see the outcome of this consultation and if it will change the Bank of England’s position on the matter.
