Bank of England governor questions need for digital pound

BoE governor Andrew Bailey highlighted that the UK already has a wholesale settlement system with a major upgrade.

Andrew Bailey, the Bank of England (BoE) governor, expressed skepticism on the need for a digital pound shortly after finance ministers from eurozone countries backed further work on a digital euro. 

The BoE governor recently questioned the need for a wholesale central bank digital currency (CBDC), citing that there already is a “wholesale central bank money settlement system with a major upgrade.”

In addition, Bailey also expressed that there are no plans to abolish cash regarding retail use. The BoE governor does not believe that retail payments need to change at the moment. He explained:

“We have to be very clear what problem we are trying to solve here before we get carried away by the technology and the idea.”

Bailey’s comments follow new CBDC developments in the eurozone and recent comments from a former BoE adviser on the costs and risks of creating a CBDC. 

On Jan. 16, finance ministers from the eurozone countries published a statement backing continued work on a potential digital euro being studied by the European Central Bank. The Eurogroup recognized that the introduction of a CBDC requires further discussion on a political level. In addition, the group highlighted the issues that it was observing, including environmental effects, privacy, financial stability and other issues.

On the same day, former BoE adviser, Tony Yates, argued in an opinion piece in the Financial Times that the costs and the risks associated with the development of CBDCs are not worth it. In addition, Yates questioned the motivations behind the creation of CBDCs, describing them as “suspect.”

Related: BIS economists suggest improving TradFi with CBDC to attract users away from crypto

Meanwhile, Iran and Russia are looking into creating a new stablecoin backed by gold. According to a report by the Russian news agency Vedomosti, Iran is collaborating with Russia to create a so-called “token of the Persian Gulf region” to enable cross-border transactions.