- The Bank of England’s consultation on the digital pound attracts over 50,000 responses, with major concerns revolving around privacy issues, the programmability of the currency, and the decline of physical cash.
- The Bank is contemplating the future of stablecoins, with forthcoming regulations potentially challenging more decentralized models.
Exploring the Digital Pound: Public Sentiments and Future Directions
Jon Cunliffe, the Deputy Governor of the Bank of England, recently revealed that the institution received a staggering 50,000 responses to its consultation regarding the digital pound. Addressing an audience at a conference held by the Federal Reserve Board in Washington, D.C., he highlighted that the majority of respondents voiced substantial concerns related to privacy issues, the programmability of the digital currency, and the ongoing decline of cash usage.
Initiated in February and concluding in June, the digital pound consultation aimed to gather public insights and opinions on the introduction of a central bank digital currency (CBDC). While the Bank of England has not formally decided to issue a digital pound, it acknowledges the likelihood and necessity of a CBDC in the near future.
In his speech, Cunliffe sought to alleviate privacy concerns, asserting that users of the digital pound would enjoy the same level of privacy currently available for electronic payments. He emphasized that the Bank of England would not have access to individuals’ personal data. Addressing the programmability of the digital pound, he clarified that the central bank does not intend to constrain the currency’s functionality.
Instead, the responsibility to develop and offer advanced programmable payment services, subject to user consent, would fall on the shoulders of private sector firms.
However, Cunliffe acknowledged the spectrum of criticisms leveled against the digital pound. These ranged from fears of rapid adoption potentially undermining the banking system and destabilizing financial stability, to contentions that the digital currency might end up being a superfluous solution in search of a problem.
Concerns regarding a possible bifurcation between cash and digital money were raised by bankers in February, prompting the government to enact legislation to ensure the continued availability of physical cash. Cunliffe confirmed general support for the overall CBDC model, though he noted that the central bank would revisit its estimates regarding uptake and holding limits.
Looking ahead, Cunliffe teased the release of a discussion paper concerning the regulatory approach to major stablecoins—cryptocurrencies pegged to stable assets like fiat currencies. He hinted at the possibility of regulations that could potentially sideline more decentralized models, highlighting the necessity for a legal entity responsible for end-to-end risk management within these payment systems.
With current technology, the use of public, permissionless transfer mechanisms appears incongruent with these requirements, signaling a potentially challenging road ahead for decentralized stablecoin models. The regulatory framework for stablecoins is expected to echo the limitations set for the digital pound, with a distinct legal entity and separate branding recommended for banks issuing stablecoins to avoid consumer confusion and prevent financial instability during periods of stress.