Stablecoins dominate, Bank of England considers halting digital pound plans: report
The Bank of England is considering halting plans to create a digital pound as the global focus shifts to stablecoins. Though, the final decision has remained undecided.
According to a recent Bloomberg report, the Bank of England has seen its priorities shift from only a few years ago when officials said that there is a possibility a digital pound would be needed. Though, the final decision is still pending as the project is still awaiting the completion of its current “design phase.”
So far, people familiar with the matter have claimed that the BOE have been urging banks to shift their focus away from CBDCs and instead develop “payment innovations that could result in similar benefits” for customers.
Governor of the Bank of England, Andrew Bailey, has even voiced his doubts of the central bank issuing its own CBDC in public. He said that banks should instead prioritize on stepping up their efforts to develop tokenized deposits.
Tokenized deposits is seen by some experts as a more stable way to bridge the gap between traditional finance and decentralized finance.
Bailey said in a statement he made in June that he remains unconvinced that “we need to create new forms of money.”
Although he has indicated that he is still onboard with supporting the creation of a wholesale CBDC meant for transactions between financial institutions, he has been less adamant on making one aimed at households.
Moreover, research from BOE staff revealed that the benefits of launching a CBDC has since diminished as more senior officials have stepped back from chairing a committee that discusses the project.
On the other hand, Bloomberg claimed that the BOE declined to give a comment on its piece.
BOE stays cautious as stablecoins take center stage
Although the BOE have considered shelving their ongoing CBDC project, it does not necessarily mean the central bank is ready to embrace stablecoins just yet.
Earlier this month, governor Andrew Bailey warned against stablecoin domination, citing lack of protections and guarantees offered by traditional bank deposits and the growing risk of them upstaging traditional fiat currencies.
Therefore, he believes that stablecoins could pose systemic risks to financial stability and threaten the very nature of money if not properly regulated.
“We are going to have to look at it very closely through that lens. It’s both a financial stability issue and a money issue in that sense,” said Bailey in his statement.
The attitude held by BOE sharply contrasts those of other countries which have decided to set aside their CBDC projects. The Trump Administration has halted work on a CBDC in the U.S. due to financial stability concerns. South Korea has also done the same to its digital currency pilot program.
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