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According to the Bank of England, CBDCs might account for up to 20% of retail and consumer deposits.
In an event streamed live on Wednesday, Bank of England governor Andrew Bailey and deputy governor for financial stability Sir Jon Cunliffe answered questions from lawmakers from the Economic Affairs Committee. When asked about the growth of innovation surrounding digital currencies in the country, Sir Cunliffe gave the following comment:
“It’s quite difficult to predict how innovators will take money and actually use money going forward. But we are starting to see programmable money being used in the crypto world. And I would expect we would see a similar revolution in the functionality of money driven by technology.”
Sir Jon Cunliffe discussing CBDCs | Source: Parliamentlive.tv
The Bank of England is looking at the possibility of introducing a digital pound CBDC for retail payments. A CBDC task committee is also looking into using a digital pound to distribute payrolls, pensions, and other benefits.
Sir Cunliffe supports the project by pointing to the fast dropping use of currency in the UK in recent years, which was accelerated by the outbreak of the COVID-19 epidemic, which discouraged physical contact in transactions. E-commerce currently accounts for roughly 30% of all transactions in the country.
Sir Cunliffe, when asked about the demand for a digital pound CBDC, said:
“We’ve modeled a very prudent assumption, which is that basically 20% of [household and corporate transactional] deposits based in the banking system could move out of the banking system and into central bank digital money.”
Nonetheless, Sir Cunliffe acknowledged that the current condition of crypto could jeopardise the country’s financial stability. In a short period of time, the market capitalisation of cryptocurrencies has risen to $2.6 trillion, with an estimated 95 percent of digital assets being unbanked and 5% consisting of stablecoins. On the other side of the Atlantic, the US is less optimistic, claiming that regulated stablecoins created by the private sector render CBDCs obsolete.