Boe-governor says that the digital currency of the regulated central bank is preferred option

Andrew Bailey indicated that he would prefer a "regulated" form of digital central bank currency that include a platform on which the bank of England would supervise commercial banks and users of Pfunde Sterling in electronic wallets.

In a speech to the Lord's Economic Committee, the Boe governor seemed to reject the two extremes, offer an anonymous digital token that resembles banknotes, or to allow private accounts at the central bank.

The Boe and the Ministry of Finance have undertaken to initiate a consultation for the idea of ​​a digital central bank currency next year, which is to be introduced in the second half of the decade.

Digital currencies of the central banks have become a hot topic because the use of cash is steadily declining and technology -giant support so -called “stable coins” - digital tokens that are coupled to currencies such as dollars, euros, yen or pound of sterling.

All of these concepts differ from cryptocurrencies such as Bitcoin, which have no stable value and rather resemble a asset, the value of which depends on demand to keep it.

But the central bankers see stable coins as an unregulated threat to existing currencies and have accelerated their internal discussions about alternatives in response to this.

Bailey said that he was "skeptical" that the best type of new payment system "A world of asset-backed stable coins with money-like features that could be regulated". However, he admitted that this raises the question of what a digital central bank currency could look like in order to use it as part of the normal payment system.

The governor said that although he was not attracted to the idea that the Boe became a banker for millions of people and a competitor for high street banks, but they wanted to have a central regulatory role in the system.

He said that the role of the bank should be to "provide the means of payment and central bank money for a platform in which banks and possibly wallet owners are the participants and are regulated", and added: "The bank should have regulatory powers over the company". that were on the platform because this is the direct interface. ”

The type of digital pound that the BOE would probably be committed would be based more on a centralized payment system than on one that switches off the central bank and enables the exchange of tokens between two people such as banknotes.

Bailey admitted that there would be problems with data protection and the administration of personal data when setting up a digital central bank currency.

For the users, a digital central bank currency would hardly differ from transactions with debit or credit cards or other payment systems such as PayPal that it would be guaranteed directly from the state, as it is now cash, which would reduce the risk of use and potential reduction in transaction costs.

Bailey repeated that Bitcoin and other cryptocurrencies grow quickly and need stronger regulation. "Today we do not consider it a direct problem of financial stability, but we see the potential to become a threat to financial stability, which is why we have to take measures on this front," he said.