Digital currency will not completely replace physical cash in the UK, as the Bank of England intends to continue providing notes and coins as long as there is demand for them. Governor Andrew Bailey made this clear during a panel discussion at the Group of Thirty’s 39th Annual International Banking Seminar in Washington. He emphasized that the evidence shows people still prefer using cash, so the central bank will meet this demand.
There have been concerns circulating online that central bank digital currencies (CBDCs) could eventually phase out cash. Privacy advocates argue that CBDCs could eliminate transaction anonymity, grant governments increased surveillance capabilities, and potentially exclude individuals from the financial system. Despite these worries, the Bank of England has initiated work on a digital version of the pound, known as Britcoin. However, the decision to launch it has not been finalized. Bailey indicated during the seminar that while the bank is cautious about introducing a retail CBDC for general consumers, he supports the idea of a wholesale CBDC for bank use.
In terms of a retail CBDC, Bailey expressed skepticism about its potential to serve as a direct substitute for central bank money. However, he sees value in having central bank money play a specific role in high-value wholesale payments and payment system settlements. The Bank of England’s development of a retail CBDC is not necessarily for immediate implementation but rather to ensure that innovation is available for the private sector and to encourage commercial banks to modernize their digital payment systems.
Bailey highlighted the importance of advancing digital payment systems, especially in the realm of cross-border payments where progress has been sluggish. He stressed the need for collaboration and openness in this area, noting that there is no justification for holding back progress. Banks, in particular, have been slow to improve cross-border payment processes, which could stifle innovation in the sector.