In front of MPs, Sir Jon Cunliffe refused to be drawn on the probability of a CBDC being launched. On a scale of 1 to 10, he said the likelihood was "more than 5."
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The Bank of England has been accused of taking an "ambivalent and half-hearted" approach to the creation of a central bank digital currency.
Deputy Governor Sir Jon Cunliffe was appearing at a hearing of the Treasury Committee that focused on the potential for stablecoins and CBDCs to play a bigger role in the U.K. economy.
The committee's chairwoman, Harriet Baldwin, pointed to repeated delays in the consultation process — first in September and October, then again in January.
Sir Jon suggested that these delays were in part down to the chaos caused by Liz Truss's time as prime minister, when a mini-budget sparked a meltdown in the markets. And with inflation remaining elevated, he hinted that the Bank of England didn't have the time and resources to focus on a CBDC properly.
Nonetheless, he pushed back on the idea that the Bank of England was being ambivalent in its examination of a CBDC — and argued that the phrase "likely to be needed" was quite forward leaning, and showed that a so-called "Britcoin" was now seen as more likely.
Sir Jon refused to be drawn on the exact probability of a digital pound being created — even when asked to rate the likelihood of a rollout on a scale of 1 to 10. "More than 5," he said, to chuckles among committee members.
A big concern for Baldwin was whether the Bank of England had been too slow to act on CBDCs so far — and has lost a lot of time given how such a digital asset could take years to develop.
But the deputy governor insisted that the U.K. is not behind other advanced economies — and the next phase of the Bank's work will reduce the time it would take to implement a CBDC.
He went on to warn that "likely doesn't mean certain" — and there are still circumstances that could see the Bank of England and the Treasury rule out a digital pound altogether.
Lacking Skills
Sir Jon admitted that the Bank of England currently lacks the technical wherewithal to launch a central bank digital currency — but it's hoped that this will be fixed soon.
And he noted that future phases would include making sure that the Bank's ambitions are technically feasible, building a working prototype that can be tested in simulated and live environments, and then advancing to a rollout.
Another member of the Treasury Committee, Anthony Browne, pointed to skeptical remarks about CBDCs made by others in the past. Crypto UK had argued there is no need for a retail central bank digital currency that's used by everyday Britons, while Sir Jon's boss — Governor Andrew Bailey — said he was not convinced of the problems it's trying to solve. Browne asked:
"You can make instantaneous payments, largely do it for free, very conveniently, with a watch, a ring… why do we need a digital pound?"
Sir Jon replied by saying that he wasn't convinced that the U.K. currently has one of the advanced payments systems in the world — and insisted that a CBDC could have huge benefits for the economy and society.
And he argued that some of these advantages may not be immediately evident. Sir Jon used the iPhone as an analogy, and said the 15 apps this device had upon launch — including a calculator and email — could be done elsewhere. But when the App Store launched, there were thousands of new applications, and then millions. Returning to a CBDC, he said:
"This is not about 'here is a particular thing we think needs to be done,' this is about opening a new frontier for people to improve payments and the way in which money is used in how we transact."
Examples of these applications could include micropayments — giving consumers the freedom to pay a small amount of money to read a newspaper article, rather than having to take out a costly subscription.
Sir Jon also said programmable money could offer compelling alternatives to "clunky and blunt" instruments such as standing orders and direct debits.
The deputy governor was also asked what it would take for the Bank of England to conclude that a central bank digital currency was definitely needed.
Sir Jon explained that he was closely looking at current political, societal and economic trends — given how the coronavirus pandemic dramatically accelerated the move away from cash.
Labour's Siobhain McDonagh went on to ask whether many Britons would be put off from using a CBDC because they don't want to be involved with cryptocurrencies in any way — but Sir Jon attempted to argue that "Britcoin" would be much different from Bitcoin. He added:
"Bitcoin and some of the scams in the crypto world have become emblematic of the new technology — this would be a very different thing, and we would have to explain to people that this is a digital banknote and not a speculative asset."
