Commercial English Banks Could Be Denied Access to CBDCs
Andrew Bailey, the Governor of the Bank of England, recently spoke in Washington about the challenges facing the financial system, as well as potential solutions and the overall state of the economy. During his speech, he also discussed topics such as cryptocurrencies, stablecoins, and CBDCs.
Andrew Bailey believes that the current crisis is not a systemic one and that banks are well-capitalized and operating smoothly. He views the policy of quantitative tightening positively and sees digital assets as a possible stage in the evolution of money.
Bailey categorizes digital assets into three groups: classical decentralized cryptocurrencies, stablecoins, and CBDCs. He has long held a negative view of the first category, claiming that cryptocurrencies are commonly used by scammers and lack intrinsic value. Despite expert opinions and research disproving these claims, many bankers still promote this position.
Now, onto this scene lands crypto and digital money. For money to fulfil its function as a means of payment it requires stability of value. This is clearly not true of unbacked crypto. It could be a bet, a highly speculative investment or a collectible, but note that it has no intrinsic value, so buyer be very aware,Andrew Bailey, the Governor of the Bank of England, says.
However, when it comes to stablecoins, Bailey believes that with some regulation in place, they could become an alternative to commercial money. Still, they do not currently ensure price stability for all customers. Interestingly, the most recent de-peg of a stablecoin (USDC) occurred due to problems in the traditional financial system.
As for CBDCs, they are being considered as a replacement for Central Bank electronic money, and there is work being done to keep up with this emerging trend. However, Bailey urges commercial financial organizations not to rely too heavily on CBDCs, as there is a possibility that they may not be accessible to retail customers due to low demand.
It requires banks to be more active in thinking about digital commercial bank money and not leave it to CBDC,Andrew Bailey, the Governor of the Bank of England, says.
The ban on regular citizens using CBDCs seems like an interesting solution because it eliminates the risks of total government control over payments. The very idea of individual bank-issued stablecoins is not new. However, it remains unclear how they will be implemented, especially considering that the Bank of England has long held a strict policy towards cryptocurrencies. In fact, in the summer of 2022, the bank released a report calling for increased regulation of cryptocurrencies.
