Jana Mackintosh
Managing Director of Payments and Innovation, UK Finance
UK consumers and businesses continue to vote with their wallets as they increasingly make digital payments. Coupled with the rise of cryptocurrency, the UK is thinking seriously about how it can support a digital economy.
The Bank of England (BoE) and HM Treasury are currently exploring a UK Central Bank Digital Currency (CBDC) through a joint taskforce. The introduction of a CBDC could be a seismic change in the way we use money. Vital steps are being taken by the BoE to engage industry leaders, technologists and academics to understand its potential impact. It’s exciting to be part of this work as we consider how new digital money could deliver better financial services for everyone in the UK.
What is a retail CBDC?
Not all cryptocurrencies are the same. If the BoE decided to issue it, a UK CBDC would be electronic money issued by the Bank, allowing electronic payments in the same way we use banknotes and coins.
What are the benefits?
CBDCs could allow faster, cheaper and more secure transactions, as well as help digital inclusion. Using CBDCs may also help combat illegal activity and fraud. However, some people are worried about loss of privacy and the use of data.
The potential benefits of new digital money are vast. We could improve how we make cross-border payments and realise the value of micropayments as a real-time way to pay for things. We should also consider what we can do to help CBDCs make our financial lives greener and more sustainable.
CBDCs could allow faster, cheaper and more secure transactions, as well as help digital inclusion.
What do we need to consider?
Realising all the benefits will require technical development and change which will take time. If we want it to be successful, we will need to co-ordinate across the ecosystem with the industry, governments and consumers and ensure this new form of money will deliver value to users.
We also need to understand the impact it will have on our existing financial system and how CBDCs will co-exist with other digital forms of money. The regulation of a CBDC will need to be carefully calibrated with the ongoing regulation of other digital assets – such as cryptocurrencies and stablecoins. If this system is to be used to make everyday payments, we will need to strike the right balance between introducing the benefits of a CBDC without making it feel disruptive or complicated for consumers. Many people across the globe will be looking to the UK to see how the debate evolves here and how our society considers what it means to move towards a modern, digital economy.