The Bank of England does not yet have the technological skills to issue a CBDC: Deputy Governor

The UK is not ready to issue a central bank digital currency (CBDC) simply because the Bank of England (BoE) does not have enough expertise at the moment, according to a deputy governor.

There is more than a 50% chance that the UK central bank will issue a CBDC, but the regulator does not yet have the technical skills to issue a digital currency, BoE deputy governor Jon Cunliffe told a Treasury committee hearing. on February 28.

Cunliffe said the BoE expects to gain the necessary expertise to move CBDC development to the next phase as the central bank plans to test a potential digital pound with private sector partners.

“But to move to the next stage, which would be to build a working prototype, test it in a simulated environment, and then start testing in a live environment, after implementation. This next phase is designed to put us in a position to do that,” said the deputy governor.

Cunliffe emphasized that the design and structure of a potential digital pound would vary significantly depending on the CBDC’s motivations. The BoE’s main motivation here would likely be to provide digital cash, or the digital equivalent of BoE notes, for “general payment purposes”, he said, adding:

“We did not want a system in which two forms of money would circulate from the Bank of England, paid and unpaid. We also didn’t want a system where we would produce something that would have the characteristics of a savings product.”

The deputy governor also highlighted some potential functions and benefits of CBDC that are not currently present in the existing financial system.

Related: UK ‘likely’ to need digital currency, says BoE and Treasury: Report

Comparing a potential digital pound to the iPhone’s App Store, Cunliffe said a CBDC is about “opening up a new frontier for people to improve payments and how money is used.” He cited micropayments as an important potential use case for a digital pound, stating:

“This will make it much, much easier for you to make very, very small payments. So if you wanted to read an article in a newspaper, you wouldn’t have to subscribe to the newspaper. You could pay tiny fractions to do that.”

The news comes amid the UK government’s increasing involvement in CBDC development, with the Treasury opening a position to lead the development of a digital pound in January 2023. Previously, BoE Governor Andrew Bailey reportedly expressed doubts about the necessity of a CBDC in the short term, while European finance ministers again showed support for a retail version of the digital euro.