Bank of England Deputy Governor John Cunliffe argued that major changes in the issuance and circulation of public and private funds could make public access to digital central bank money important for future financial stability.
In his keynote address at the OMFIF Digital Money Institute in London, Cunliffe highlighted past, present and future trends in the widespread use of private money issued by commercial banks, noting that the COVID-19 pandemic has accelerated the current trend of moving from public money to private money. Money. For daily payments.
Around 70% of respondents in a recent Bank of England survey indicated that they spend less cash than they did before the pandemic, and tend to resort to options such as contactless payments and online transactions.
As this transition from government money in the form of cash to private money from commercial banks continues to accelerate, Cunliffe predicted that new technology is likely to bring about equally important changes in the use of money and even its perception, with potential implications for flexibility. . As a social identifier.
He noted that cryptographic technology and distributed ledgers, especially when used by large non-banking and technology entities, are likely to provide audiences with more flexible data-driven economic forms that will provide new jobs in the digital world.
With the emergence of new phenomena such as stack coins, programmable money, smart contracts and micropayment channels, Convliffe said, central banks are already tackling important questions about how to adapt existing regulatory frameworks that are currently being developed to trade commercial bank money.
These technological changes, according to Cunliffe, also raise the question of whether central banks should risk further reducing public funds or even disappearing altogether.
Without anticipating the next published Bank of England study on these issues, Cunliffe argued that new forms of private money are likely to be a strong case for introducing public digital money (such as the central bank’s digital currency or CBDC) to anchor them. Public confidence in money consolidation; In other words, confidence in the replacement of all funds in the national economy.
He said it was unlikely to maintain access to cash, as the Bank of England has already promised. “In the UK, it seems likely that if we are to preserve public money that can be used publicly and accessible to citizens, the country will need to issue public digital money that can meet the needs of modern life,” he said.
Cunliffe further noted that, especially in times of systemic stress, “the notion that there is no way out of private money and that there is no access to secure, state-funded liquidity can undermine confidence.” From this perspective, a central bank’s digital currency will be crucial to ensure financial stability across the country.
In November 2020, Cunliffe already stated that the central bank will have to adapt to changes in banking models and deal with the macro-financial and economic consequences that these changes have.