Editorial & Advertiser disclosure

Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.

Banking

No ‘red line’ against central bank digital currency, BoE’s Hauser says

Published by Jessica Weisman-Pitts

Posted on June 1, 2022

Featured image for article about Banking

By David Milliken

LONDON (Reuters) -A central bank digital currency (CBDC) would not pose too big a challenge for the Bank of England’s operations, Andrew Hauser, the BoE’s executive director for markets, said on Wednesday.

The BoE is due to consult this year about whether it should create its own digital currency – a competitor of sorts to cryptocurrencies such as bitcoin – after encouragement from finance minister Rishi Sunak to consider a possible ‘Britcoin’.

Hauser said a central bank digital currency would be the first new type of central bank liability in centuries, but not one that was incompatible with the BoE’s goals.

“The dog may be old, but it can still perform new tricks,” Hauser said ahead of a discussion to be hosted by the Federal Reserve Bank of New York.

“By themselves, balance sheet considerations do not obviously present any ‘redline’ arguments against CBDC adoption,” he added. “The use of the central bank balance sheet to provide state-backed transactional money is one of our most longstanding functions.”

The BoE has said any CBDC would not replace cash and would be equivalent in value to sterling banknotes.

The BoE views the sterling reserves which commercial banks already hold with it as a type of digital currency, and a fully-fledged CBDC as a broader form of public access to this system, potentially reducing banks’ role in day-to-day payments.

Western central banks’ interest in CBDCs has been spurred by the possibility that a major tech company might create its own form of payment. This could bypass the traditional banking system, creating concerns about privacy and financial stability.

If a company did go down this route, it should expect to be regulated to the same standards as a bank, Hauser said.

Existing ‘stablecoins’ – a type of cryptocurrency which is pegged to a mainstream currency or commodity – did not meet these standards, Hauser said.

“Holders of such coins must accept at least the possibility of finding themselves badly out of pocket,” Hauser said, citing the recent collapse of TerraUSD and a temporary dip in the value of the more widely used Tether.

(Reporting by David Milliken, Editing by Kylie MacLellan)