Yesterday, the UK Treasury Committee held a hearing with Bank of England (BofE) officials to discuss the issue of Central Bank Digital Currencies (CBDCs). Sir Jon Cunliffe, Deputy Governor for Financial Stability, shared the Bank’s position on the ongoing consultation on a possible digital pound. When pressed, he said that the Bank believes there is more than a 50% chance that a retail CBDC will launch in the future. He described the potential advantages of the new form of payment.

In the first round of questions, Bank officials were asked about the ambivalent tone of the consultation paper, which argued that while a CBDC is likely to be needed, the decision on whether the BofE should launch a. Sir Cunliffe defended the Bank’s position by arguing that this stems from the fact that many of the trends in the economy, society and technology are still evolving. A CBDC represents a major public infrastructure project that cannot simply be rushed. Therefore, prior preparation is needed. However, “it would be complacent to assume that those new technologies won’t develop and that people won’t find ways to embed payment operations much more deeply into digital platforms,” ​​Cunliffe said, so forward-looking assessment is essential.

Overall, the BofE points to huge benefits for the economy and society. CBDCs would allow things like micropayments, automated delivery systems, and programmable money. But rather than addressing a particular consumer need or market failure, the Bank emphasizes that “it’s about opening up a new frontier for people to improve payments and the way money is used,” Cunliffe said.

However, the consultation also recognized six areas of potential conflict that will require further evaluation to ensure performance is not sacrificed, including security, resiliency and privacy. These areas will continue to be explored in the next design stage, but are already raising questions about what kind of accountability frameworks could be put in place. In other words, who pays when something goes wrong?

Lastly, the issue of financial inclusion was a key theme throughout the hearing. Over a million people in the UK don’t have a bank account, and 20 per cent of adults say cash is still their preferred method of payment, so the shift to a highly digitized and cashless society could Seriously affect your ability to make payments.

But while it is difficult to fully predict people’s future attitudes towards money, the BofE envisions situations where a CBDC could lead to greater financial inclusion. For example, digital wallets require fewer compliance checks and documentation than regular bank accounts. Cash will still be around for some time, but there is no desire to restrict the growth of internet commerce. “People want to pay in a way that fits their way of life, and businesses want to accept payment in the way that works best for them. That is what drives the drop (in cash),” said the Lieutenant Governor.