The Bank of England will not protect commercial banks against the impact of digital currencies, the BoE deputy governor Sir Jon Cunliffe has stated. Rather, these banks must adjust to the emergence of digital currencies and find a way to stay relevant.
Speaking during an online seminar, Cunliffe acknowledged that digital currencies could change the financial industry in England. One of the main changes would be a dramatic reduction in the number of households willing to hold money in traditional bank accounts.
However, protecting the banks isn’t the BoE’s job, Cunliffe made clear.
“Our job is not to protect bank business models. 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.”
Cunliffe, who is in charge of financial stability at the BoE, believes that policy makers must accelerate their digital currency considerations. As Reuters reports, Cunliffe called on the policy makers to keep up pace with the private sector’s development of digital currencies or risk being unable to regulate the industry.
“They [digital currencies] 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.”
Sir Cunliffe’s view mirrors that of Benoît Coeuré, the head of innovation at the Bank of International Settlements. In a recent interview with French newspaper L’Express, he stated that developments in the digital currency space have forced private and central banks to innovate quickly to keep up.
He told the paper, “If the ECB, the Fed and the other central banks want to continue to fulfill their role vis-à-vis society, which is to ensure financial stability and to ensure that monetary policy can be adjusted, broadcast throughout the economy, they must adapt their intervention methods to the new digital situation.”
While Cunliffe believes that digital currencies could disrupt the financial system, his superior, BoE Governor Andrew Bailey isn’t as optimistic. During a panel discussion with ECB’s Christine Lagarde and the Fed chair Jerome Powell, Bailey stated that digital currencies don’t offer certainty of value as a payment instrument currently.
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