Bank of England Deputy Governor Jon Cunliffe has dismissed the idea that the central bank has to protect commercial banks against the potential future impact of digital currencies.
According to Reuters, Cunliffe claimed that the Bank of England’s job is “not to protect bank business models,” and added:
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.
Central bank digital currencies (CBDCs) are believed to have the potential to dramatically impact households’ willingness to hold money in traditional bank accounts, as the funds could even be store in digital wallets provided by central banks.
Some of the world’s largest central banks, including the Bank of England itself, have looked into the launch of their own digital currencies, as these could help simplify domestic and international payments, and would allow their holders to pay via the internet and offline directly.
Widespread use of these CBDCs, it’s believed, could affect commercial banks by depriving them of a stable source of funding like retail deposits. To Cunliffe, the political world should pay more attention to CBDCs and their potential implications. He was quoted as saying:
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
Earlier this year, in May, Cunliffe warned that cryptocurrencies and central bank digital currencies could dry up the supply of credit through the banking system, which could have “profound economic consequences.”
Featured image via Pixabay.