Bank of England to suspend digital currency development
The Bank of England (BOE) is reportedly considering shelving its plans to launch a retail central bank digital currency (CBDC), popularly known as the digital pound, as momentum in the global financial ecosystem shifts toward stablecoins.
The BOE is no longer prioritizing the creation of a retail-facing digital currency. Instead, officials are urging banks to focus on payment innovations such as tokenized deposits, which they say can offer similar benefits to consumers without needing a new form of money, reports Bloomberg.
Bailey voices doubts on the need for a retail CBDC
Governor Andrew Bailey has publicly questioned the need for the BOE to issue a digital pound. In a June statement, Bailey expressed skepticism, saying he remains “unconvinced that we need to create new forms of money.” While he continues to support the development of a wholesale CBDC for interbank transactions, he has shown little enthusiasm for one aimed at households. Internal BOE research suggests that the potential benefits of a digital pound have diminished, and several senior officials have quietly stepped back from the project’s advisory committee. Despite these signs, the BOE has not formally abandoned the idea, as the design phase is still underway.
Stablecoins rise, but caution remains
Even as the BOE considers pulling back on its CBDC project, it remains wary of fully embracing stablecoins. Bailey has warned that stablecoins, without robust regulatory oversight, could threaten the financial system by undercutting the trust and stability offered by traditional bank deposits. He emphasized that stablecoins must not be allowed to evolve without scrutiny, stating, “It’s both a financial stability issue and a money issue.” The BOE’s cautious stance contrasts with that of other nations like South Korea and the United States, where CBDC initiatives have also been paused due to similar concerns about systemic risk. However, unlike some peers, the BOE is also reluctant to embrace stablecoins without significant regulatory safeguards in place.
Recently we wrote that Bank of England Governor Andrew Bailey has issued a stark warning to banks about the systemic risks posed by stablecoins, urging institutions to avoid issuing them altogether.
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