- Oops!Something went wrong.Please try again later.
Bank of England (BoE) officials have said that if a central bank digital currency (CBDC) was introduced, 20% of deposits could move out of the commercial banking system as a result.
Speaking at the Economic Affairs Committee in the Lords on Tuesday, Sir Jon Cunliffe, the bank's deputy governor for financial stability, said it had made a "prudent assessment" of the 20% move.
He also said banks could potentially lose a revenue stream from payments as a result of its implementation.
Cunliffe added that if banks are healthy and competitive they will adjust to this change, just as they had been nimble in the face of change in the past.
He also said that there is a future in cash too, which would have an anchoring role in financial stability of systems.
A potential digital pound, dubbed 'Britcoin' by the press, has been in the offing since April this year. In September, the bank brought in representatives from ASOS (ASC.L), Spotify (SPOT) and PayPal (PYPL), among other companies, to consult on its CBDC Engagement and Technology forums.
BoE governor Andrew Bailey also told the committee that despite the "large and rapid growth" of stable coins and digital assets around the world, it is "not regarded as a direct financial stability issue".
The question becomes, 'how do we tackle that world?', he said, offering two options. One would be to regulate so-called stable coins and the other would be to bring in a CBDC.
Cunliffe went on to say that there are a number of issues that need to be addressed and tested before any CBDC is brought in in the UK, as well as time given for the banking system to adjust while it changes.
He also said the bank didn't yet have visibility on predicted uptake by consumers as it did not yet know the full scope of what a CBDC would mean for the UK.
The bank recently laid out its plans for the next stage of development in digital currency in the UK. If the results of this "development" phase conclude that the case for CBDC is made, and that it is operationally and technologically robust, then the earliest date for launch of a UK CBDC would be in the second half of the decade, it said at the time.
In a statement earlier in November, the Bank said that in 2022, the Treasury and the Bank will launch a consultation which will set out their assessment of the case for a UK CBDC, including the merits of further work to develop an operational and technology model.