I think we all miss the news that the so-and-so Central Bank is considering introducing electronic currency. So far, no bank has launched Central Bank Digital Currency (CBDC), but there is a lot of talk about it. The reason is simple: cryptocurrencies are exploding and people want to invest in new assets.
The Bank of England is also watching these trends and has actually hinted in its note that it plans to take a closer look at the introduction of digital currency, although the final decision is yet to be made in the future.
The Bank of England said in a memo published Monday, June 7, 2021, that the BoE should at least “take a close look at CBDC”.
No decision has been made yet, but the Bank plans to at least explore and take advantage of digital currencies.
To give you an idea, CBDCs are actually the same cryptocurrencies, more precisely stablecoins, which are linked to an underlying asset (a national currency, in the case of the Bank of England it is the pound sterling).
How CBDC can be used
The main question that may arise is how digital currencies can be used by the Bank of England for the benefit of the general public.
In a note, the Bank of England pointed out that although CBDC has advantages in creating a more stable and competitive payment system, there are still many doubts for the economy as a whole and for the financial system in particular.
The Bank of England also outlined a possible scenario in which one-fifth of all retail deposits in the United Kingdom could use CBDC.
However, as I said, the decision is still pending and the Bank of England plans to work with the Treasury and the Treasury to explore in more detail the possible pros and cons of introducing CBDC.
In particular, the question of how the possible introduction of the CBDC could affect the management of the country’s monetary policy and have an impact on financial stability, in general, requires more detailed study.
