A top Bank of England official has told MPs that there is now a more than 50% chance that a UK digital currency will come into existence.
Sir Jon Cunliffe, the Bank of England’s deputy governor for financial stability and lead on its work around whether to introduce a digital pound, said: “We’ve moved on the probability spectrum from ‘it may or may not [happen]’ to ‘we think it’s more likely than not’.”
He was speaking in front of the Treasury Committee as part of its inquiry into the cryptocurrency industry.
A 6 February consultation from the Treasury and the BoE said the UK would probably need a central bank digital currency, and that City firms may face limits to how much of it they could hold.
Holdings of a central bank digital currency by businesses and individuals would be capped — at least in the introductory phase — according to the consultation. Firms have until 7 June to respond.
Treasury Committee chair Harriett Baldwin criticised the tone of the document, saying it was “ambivalent and half-hearted”.
“On the one hand you say a CBDC is likely to be needed and on the other hand you’re saying that a decision hasn’t yet been taken to have one,” she said at the 28 February hearing.
On a scale of one to 10, Sir Jon rated the chance of a so-called Britcoin coming into existence as “more than five”.
He added that the BoE had been “quite forward leaning”.
“I don’t think we’re behind any other advanced economies in where we are on this,” he said.
He added that some of the barriers to developing a digital pound were practical considerations, and the BoE needs “to see whether it is technically feasible and what it would involve”.
Asked if the BoE has the technical skills to implement at CBDC, he said, “not at the moment”.
“We would hope by the end of this next phase to have the skills to… build a working prototype, to test in a simulated environment, and then you would be into testing in a live environment and then implementation. This next phase is designed to put us in a position to do that.”
Select few countries have so far launched a CBDC, most notably China. The eurozone is exploring a digital euro. The US Federal Reserve is experimenting with a potential digital dollar despite historic scepticism to the idea, and launched its own discussion paper last May.