November 13, 2020
By David Milliken and Tom Wilson
LONDON (Reuters) – Bank of England Deputy Governor Jon Cunliffe said it was not his job to protect banks from the impact of future digital currencies, which could dramatically reduce households’ willingness to hold money in traditional bank accounts.
“Our job is not to protect bank business models,” Cunliffe said at an online seminar.
“Banks will have to adjust. Our job is to ensure that if bank business models change, we manage the financial and macro-economic consequences of that.”
The world’s largest central banks, including the BoE, are considering how their own digital currencies could play a role in simplifying domestic and international payments.
Central bank digital currencies (CBDCs) would allow holders to make payments via the internet and possibly even offline, competing with existing means of electronic payment such as digital wallets, online banks or cryptocurrencies.
Widespread use of CBDCs could hollow out commercial banks, depriving them of a cheap and stable source of funding like retail deposits, some central banks have warned.
Cunliffe said the political world needed to step up their assessment of the implications of any future CBDC.
“They need to go up the political agenda quite fast before the political side discovers there are developments in the private sector that actually don’t fit with policy,” he said.
(Reporting by David Milliken and Tom Wilson; Editing by Kate Holton and Toby Chopra)