Bank of England to press on with digital currency in case banks fall short, Bailey says

The Bank of England is reluctantly pressing on with work to create a form of digital money accessible to the general public, as commercial banks risk failing to keep up with less-regulated tech firms, Governor Andrew Bailey said on Saturday, Reuters reported.

Bailey’s remarks build on his longstanding concerns that he does not want to see day-to-day payments or banking-type services shift to cryptocurrencies or services from tech companies that are less safe or private than banks.

“That (CBDC) is not my preferred option, but it’s one we can’t rule out,” Bailey said at the Group of Thirty in Washington, a forum for central banks and commercial bankers.

While Britain’s electronic payment infrastructure already provides fast transfers with no upfront costs for the public, future forms of digital currency could offer more options in areas such as automatic payments.

“Commercial bank money, i.e. the banking system, is the best home for that innovation,” Bailey said.

“But … are they the only game in town? At the Bank of England we’re continuing to prepare for a retail CBDC, because to be frank we are not yet seeing enough evidence that innovation will happen in the commercial banking system.”

Commercial banks might be avoiding innovation because they made too much profit from the current system, Bailey said.

“To be particularly frank about this, if the rents that are being earned from the ‘rails’ (payment systems) act to inhibit innovation and act to inhibit competition, that is why … we need a retail CBDC on the table,” Bailey said.