A former Bank of England economist, Neil Record, has criticized the central Bank’s proposal for a digital pound, labelling it as an expensive and unnecessary initiative driven more by the Bank’s financial interests than genuine consumer needs in an article for The Telegraph.
He argues that the reasons put forth by the Bank do not justify such a significant investment. Record points out that the decline in cash usage threatens the Bank’s economic model, as the interest earned from cash holders is a vital income source, suggesting that the digital pound is primarily an effort to address this issue rather than consumer demand.
“A world where cash becomes rarely used, and not widely held, would fundamentally damage the Bank of England’s economic model, and hence its existence in its current (independent) form,”
he wrote.
Record also highlighted the robust digital payment systems in the UK, such as bank accounts and mobile payment platforms, which provide secure and convenient transactions. He argues that a government-backed digital currency would struggle to compete with these options, particularly since it likely wouldn’t offer interest on balances. This could make a central bank digital currency less appealing than current bank accounts, which can provide interest on funds.
Beyond financial concerns, Record raised concerns about potential privacy issues and the low public trust in a state-controlled digital currency, questioning the initiative’s benefits given the £24 million already spent on research. He urged the Bank of England to prioritize its core responsibilities, like controlling inflation. The Bank of England and HM Treasury began exploring a digital pound in 2021, but no final decision has been made on its introduction.
Notably, The Bank of England’s Prudential Regulation Authority (PRA) has taken steps to enhance oversight of the broader crypto sector. In a statement released on December 12, the PRA instructed financial firms to disclose their current and projected crypto-asset exposures by March 2025.
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