Bank of England's Digital Currency Efforts

By David Milliken

WASHINGTON (Reuters) – The Bank of England (BoE) is moving forward with plans for a public-access digital currency, due to concerns about commercial banks lagging behind tech firms, according to Governor Andrew Bailey on Saturday.

Bailey emphasized his worries about day-to-day payments shifting towards potentially less safe cryptocurrencies and tech services. The BoE and the UK finance ministry have stated that a final decision on a state-backed digital pound or central bank digital currency (CBDC) will not happen before 2025, following a consultation that raised privacy concerns.

Bailey remarked, "That (CBDC) is not my preferred option, but it's one we can't rule out," during his comments at the Group of Thirty, a central banking forum in Washington.

Currently, the UK's electronic payment infrastructure allows for fast transfers without upfront costs. However, future digital currencies might offer additional options like automated payments.

Bailey stated, "Commercial bank money, i.e. the banking system, is the best home for that innovation," but questioned whether they would be the only solution. He noted that the BoE is preparing for a retail CBDC, mentioning a lack of innovation in the commercial banking system.

He suggested that commercial banks might resist innovation due to their substantial profits within the existing infrastructure, stating, "If the rents from the 'rails' inhibit innovation and competition, that is why … we need a retail CBDC on the table."