The Governor of the Bank of England, Andrew Bailey, expressed concerns regarding commercial banks potentially lagging behind less-regulated technology companies. This has prompted the Bank of England to reluctantly explore the creation of a digital currency accessible to the public.
Bailey's longstanding worry is that he does not want everyday payments or banking-like services to shift towards cryptocurrencies or services from tech companies that may lack the security and privacy of banks. The Bank of England and the UK Treasury have stated that a final decision on whether to proceed with a state-backed digital pound or a central bank digital currency (CBDC) will not be made before 2025, following consultations that raised widespread privacy concerns.
Though Bailey mentioned that a CBDC is not his preferred option, it remains on the table. The UK's electronic payment infrastructure currently offers the public fast transfers without upfront fees. However, future digital currencies may provide more options in automatic payments and other areas.
Bailey argued that commercial bank money, within the banking system, is the best place for such innovation. However, he questioned whether they are the only option, noting the Bank of England's ongoing preparations for a retail CBDC. He acknowledged insufficient evidence of innovation within the commercial banking system.
Bailey suggested that commercial banks might be avoiding innovation because they generate substantial profits from the current system. He highlighted that if the profits inhibit innovation and competition, a retail CBDC is necessary.
