UK May Need Digital Pound, Bank of England's Jon Cunliffe Says
Jon Cunliffe, deputy governor at the Bank of England (BoE), said there may be a need for a digital version of the British pound while discussing if the collapse of crypto giant FTX should influence a decision to issue one.
Although he initially thought there was no connection between the collapse of crypto giant FTX and the central bank's work on a central bank digital currency, Cunliffe said on Monday that he understands the concerns.
"Over the past few days, I have had a few comments both to the effect that the collapse of FTX shows that we need to get on and issue a digitally native pound – and to the effect that FTX shows that we do not need do so," Cunliffe said, speaking at the Warwick Business School’s Gilmore Centre Policy Forum Conference on DeFi and Digital Currencies.
The comments are justified as FTX in particular is "emblematic of these new technologies and the possibility that they might revolutionize financial services and the forms that money takes," according to the deputy governor.
Sam Bankman-Fried's multi-billion dollar crypto enterprise FTX filed for bankruptcy in the U.S. this month after a liquidity crunch set off by a CoinDesk article led to its collapse. On Monday, Cunliffe said that crypto needed to be brought into the relevant policy frameworks in the U.K. to protect consumers, investors, financial stability, and enable innovation. Cunliffe has previously called for existing financial regulations to be extended to cover crypto.
The Financial Services and Markets bill, that could end up regulating crypto as financial instruments and give U.K. regulators – including the BoE – more control over the sector is being debated in Parliament. Under the framework, the BoE intends to regulate large issuers of payments-focused crypto assets like stablecoins. The central bank will kick off a consultation on stablecoins next year that will look at "the requirements for corporate structure, governance, accountability and transparency necessary" to meet the standards expected in other parts of the financial system, Cunliffe said on Monday.
"The FTX example underlines how important these aspects are," he said.
The BoE has also been exploring issuing a digital pound. The BoE's work on a "digitally native pound" is driven by trends in payments, Cunliffe said, "including the reducing role of cash, and more generally in the increasing digitalization of daily life."
"Our approach as regulators should be open – by which I mean we should be prepared to explore whether and if so how the necessary level of assurance equal to that in conventional finance could be attained. But we should also be firm that where it cannot, we are not prepared to see innovation at the cost of higher risk," Cunliffe said.