New technologies could help to open up a “new frontier” for payments and the way in which money is used, a Bank of England boss has told MPs.
Work on a digital pound, regulated by the Bank of England, was delayed by the “pressure of other business” in September and October last year, the deputy governor Sir Jon Cunliffe told a Treasury Committee.
There “just wasn’t the time” to devote to the Bank’s digital currency consultation paper in the autumn months due to the “pressure of other business,” Sir Jon said.
In late September, in the wake of the Liz Truss September mini-budget, the Bank launched an unprecedented market intervention to prevent a collapse of pension funds as uncertainty gripped the market and the pound sank to a record low.
Sir Jon was asked about delays in producing a consultation paper on a so-called Britcoin by MPs on the Treasury Committee.
The delays were not as a result of a difference of opinion on policy between the Bank and the Treasury, he said. Nor did the post-mini budget delay bring the UK behind other countries in developing digital currencies.
“I don’t think we’re behind other advanced economies in where we are on this,” he said.
Whether or not a central bank digital currency is created in the UK is still not certain, although Sir Jon said “it’s more likely than not”.
When a digital pound may be introduced is also uncertain.
“What we’re trying to do is to see how trends in the economy, how trends in payments, how trends in society, and how trends and technology will play out,” he said.
“We don’t know, I would have thought, enough about those trends, to actually say ‘yes, let’s implement a very major public infrastructure’.”
A digital version of sterling would not replace either physical cash or existing bank accounts, according to the Bank of England
But work is being done now on Britcoin to avoid a situation when it’s certain a digital pound is needed but the system has not been set up as the process can take up to five years.
“If we just wait until it’s nine out of 10 (need for a digital pound) we’re five years away at least,” he said.
“It may be that in the crypto world you can run up a payment system very quickly, but this would be a very serious thing that would have to be resilient, fraud-proof, and secure.”
The focus on whether to create a Britcoin is not about whether there is a current need but more about “creating new possibilities”, he said.
“So this is not about here’s a particular thing we think needs to be done,” Sir Jon said. “This is about opening a new frontier for people to improve payments and the way in which money is used in how we transact.”
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He also laid out some new uses for digital currency: they could be to pay for very small payments, such as for a newspaper article, or automating payments such as when an online delivery does not arrive.
While cash is declining in popularity and only 20% of people identified it as their preferred payment method, it will be available to use for “as long as anybody wants it”.
“I expect cash to be around for quite a long time – decades probably,” he said.
Unlike crypto the coin would have intrinsic value connected to the pound.
A digital pound would work like paper money by being issued and controlled by the Bank of England. It would be interchangeable with cash and bank deposits.
At present digital money is only issued to banks, rather than the general public, but with a digital currency digital money can be sent without the need for a bank account.