Following the endorsement of eurozone finance ministers for further preparatory work on the proposed digital euro, Andrew Bailey, Governor of the Bank of England (BoE), has raised doubts about the necessity of a digital pound.
Governor Bailey questioned the need for a wholesale central bank digital currency (CBDC), pointing out that a wholesale central bank money settlement mechanism already exists and has improved significantly.
He also emphasized that there are no plans to stop using cash in retail establishments and that he does not believe the retail payment system should be altered at this time.
“We have to be very clear what problem we are trying to solve here before we get carried away by the technology and the idea,” Bailey said.
His comments follow similar statements made by a former BoE advisor on the risks and costs of establishing a CBDC, as well as recent developments in the eurozone concerning CBDCs.
The European Central Bank is currently exploring the feasibility of a digital euro, and on Monday, eurozone finance ministers stated that they support ongoing efforts to bring the CBDC project to fruition.
However, the Eurogroup agreed that further political debate is necessary before the CBDC can be implemented. The committee also highlighted the critical issues it had identified regarding the project, such as privacy concerns, financial stability, and environmental implications.
The ministers stated:
“The Eurogroup considers that the introduction of a digital euro as well as its main features and design choices requires political decisions that should be discussed and taken at the political level.”
The ministers believe that a digital euro should be used in addition to currency rather than as a replacement and that offline functionality should be investigated to support a broader range of applications and promote financial inclusion.
This year, the EU is expected to publish a draft bill outlining how a digital euro would interact with existing EU regulations.
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