BANK OF ENGLAND GOVERNOR QUESTIONS NEED FOR DIGITAL POUND

The potential introduction of a digital pound, a central bank digital currency (CBDC) issued by the Bank of England, has been a topic of much debate and anticipation.While proponents argue that a digital pound could revolutionize the UK's payment infrastructure, fostering innovation and enhancing financial inclusion, Bank of England Governor Andrew Bailey has recently voiced skepticism about its necessity. Like banknotes, it would be issued directly by the Bank of England. You could hold your digital pounds in a digital wallet and spend them in shops or online. A digital pound would be denominated in sterling and its value would be stable, just like banknotes. 10 in digital pounds would always have the same value as a 10 banknote.This questioning comes even as the Eurozone moves forward with preparations for a digital euro, highlighting a divergence in perspectives among major central banks.Bailey's reservations center around the perceived lack of a ""must-have"" reason for developing the technology, given the existing robust wholesale central bank money settlement systems. In this article, our CEO and Founder, Gilbert Verdian, explores some of the misconceptions raised in the response to the Bank of England and HM Treasury’s consultationHowever, HM Treasury and the Bank of England published a consultation paper indicating a digital pound is likely needed in the future.This article delves into the nuances of this debate, exploring the arguments for and against a digital pound, the potential implications for the UK economy, and the ongoing consultations shaping its future. Yesterday the Bank of England Governor, Andrew Bailey, attended a Treasury Select Committee hearing on financial stability. During the session, there was a discussion about stablecoins and a digital pound, both a retail and wholesale central bank digital currency . Bailey doesn t see the need for either.We'll examine Bailey's specific concerns, the perspectives of other key figures, and the potential impact on consumers and businesses, providing a comprehensive overview of this critical issue.

The Core Argument: Why Question a Digital Pound Now?

Andrew Bailey's skepticism stems from the belief that the UK already possesses a well-functioning wholesale central bank money settlement system. Andrew Bailey, Bank of England governor, has defended the ringfencing rules that force UK lenders to separate their retail operations from other activities, warning thatHe argues that before embarking on the complex and costly endeavor of creating a CBDC, there needs to be a compelling reason that demonstrably outweighs the existing infrastructure. That admission by Financial Services Minister Andrew Griffith that HM Treasury was due to launch in the coming weeks a public consultation on the attributes of a digital pound, came after the idea was first mooted by then Chancellor (now Prime Minister), Rishi Sunak in April 2025. Back in 2025, Sunak said the UK was exploriHe has emphasized the need for the technology to offer benefits beyond what is already available, such as improved efficiency, increased competition, or enhanced financial inclusion.In a recent Treasury Select Committee hearing on financial stability, Bailey expressed his reservations about both retail and wholesale central bank digital currencies.

Bailey highlighted that the UK already has a wholesale settlement system with a major upgrade.

• Existing Infrastructure: Bailey points to the existing wholesale payment system as adequate, suggesting upgrades are sufficient.
• Lack of Compelling Need: He argues there needs to be a ""must-have"" reason that justifies the investment and disruption.

The Counter-Argument: The Future Needs a Digital Pound

Despite Bailey's reservations, a consultation paper published by HM Treasury and the Bank of England suggests that a digital pound is ""likely to be needed in the future."" This position is based on several factors, including evolving trends in payments, the potential for innovation, and the need to maintain monetary and financial stability in an increasingly digital world.

According to this argument, several factors drive the need for a digital pound:

• Future Trends in Payments: Digital payments are rapidly increasing, and a digital pound could ensure the UK remains at the forefront of this trend.
• Innovation and Competition: A digital pound could foster innovation by providing a platform for private sector firms to develop new payment services.
• Financial Inclusion: A digital pound could provide access to financial services for underserved populations.
• Maintaining Stability: A digital pound could serve as an anchor of monetary and financial stability in an increasingly digital economy.

Furthermore, a digital pound, issued by the Bank of England, would be seamlessly exchangeable with cash and bank deposits, ensuring the continuity of a trusted, uniform, and accessible means of payment.The Bank and HM Treasury judged it likely that a digital pound would be needed in the future.

Addressing Public Concerns: Privacy and Data Protection

One of the major concerns surrounding a digital pound is the potential for government surveillance. Bank of England governor questions need for digital pound PANews ｜ BoE governor Andrew Bailey highlighted that the UK already has a wholesale settlement system with a major upgrade.To address these fears, the Government and the Bank of England have committed that they would not access users' personal data in a digital pound ecosystem. The governor of the Bank of England has downplayed the idea of launching a central bank digital currency, warning that there is still no must-have reason for developing the technology. Speaking to an audience at Chicago Booth Business School in London, Andrew Bailey said there needed to be a case for providing benefits that existingPublic consultation and parliamentary approval will be prerequisites for any legislative steps, with a strong emphasis on ensuring privacy and data protection.

The Consultation Process: Shaping the Digital Pound

In early 2025, the Bank of England and HM Treasury launched a consultation paper exploring the need for a digital pound and proposing a set of design choices.The consultation received over 50,000 responses, indicating significant public interest in the topic.The Bank and Government are taking account of developments in the wider payments landscape to refine the design.

The consultation process highlights:

• Public Engagement: The large number of responses demonstrates public interest.
• Design Considerations: The consultation explores various design choices for the digital pound.
• Iterative Approach: The Bank and Government are adapting their approach based on feedback and evolving technology.

Potential Impact on the UK Economy

The introduction of a digital pound could have significant implications for the UK economy, impacting everything from retail payments to wholesale financial markets.

Benefits:

• Increased Efficiency: Digital payments can be faster and cheaper than traditional methods.
• Enhanced Competition: A digital pound could level the playing field for smaller payment providers.
• Financial Innovation: A digital pound could stimulate the development of new financial products and services.
• Reduced Reliance on Cash: As cash usage declines, a digital pound could provide a public alternative to private digital currencies.

Risks:

• Financial Stability: A large-scale shift to a digital pound could destabilize the banking system.
• Privacy Concerns: Ensuring the privacy of digital pound transactions is crucial.
• Cybersecurity Risks: A digital pound system would be a prime target for cyberattacks.
• Exclusion of Vulnerable Groups: Ensuring that all members of society can access and use a digital pound is essential.

Digital Pound vs. Our assessment is that future developments in payments and money will make it likely that, alongside regulation, we will in future need a digital pound, issued by the Bank of England to perform this anchor function. The experience of digitalisation is that new products and services, enabled by new technology, can be adopted rapidly at scale.Cryptocurrency: Key Differences

It's crucial to distinguish between a digital pound and cryptocurrencies like Bitcoin. Bank and HM Treasury judged it likely that a digital pound would be needed in the future. Rather than assessing that question against the status quo of payments today, it is vital to considerWhile both are digital forms of money, they operate on fundamentally different principles. 3.0 TV is a news channel which gives you the latest news on blockchain and cryptocurrency on a daily basis which include Bitcoin (BTC), Ethereum, LUNA, USTA digital pound would be issued and backed by the Bank of England, making it a centralized and stable form of digital money. BoE governor Andrew Bailey highlighted that the UK already has a wholesale settlement system with a major upgrade. Source : [Bank of England governor questions needIn contrast, cryptocurrencies are typically decentralized and volatile, relying on blockchain technology and market forces for their value.

Here's a table summarizing the key differences:

The Global Context: Digital Currencies Around the World

The UK is not alone in exploring the possibility of a CBDC. The Bank of England s move towards developing a retail central bank digital currency (CBDC) signifies a crucial pivot in the UK s financial landscape. Governor Andrew Bailey s remarks at the Annual International Banking Seminar underscore a growing urgency to modernize payment systems, particularly in the face of stagnation withinSeveral countries around the world are actively researching and developing digital currencies, including China (digital yuan), the Eurozone (digital euro), and the United States (digital dollar research).The motivations behind these initiatives vary, but common themes include improving payment efficiency, promoting financial inclusion, and maintaining monetary sovereignty in the face of increasing digitalization.

The Digital Euro

While the Bank of England grapples with the necessity of a digital pound, the Eurozone is moving forward with preparatory work on a digital euro. Jon Cunliffe says it is likely that a retail, general purpose digital central bank currency - a digital pound - will be needed by the end of this decade. He discusses why this isThis divergence highlights the different priorities and perspectives among major central banks.The European Central Bank (ECB) sees a digital euro as a way to ensure that citizens have access to central bank money in the digital age and to promote innovation and competition in the payments landscape.

China's Digital Yuan

China has been at the forefront of CBDC development, with its digital yuan (e-CNY) already in pilot programs.The e-CNY aims to improve payment efficiency, reduce reliance on cash, and enhance financial inclusion. The governor of the Bank of England has downplayed the idea of launching a central bank digital currency, warning that there is still no must-have reason for developing the technology.China's experience with the digital yuan could provide valuable lessons for other countries considering CBDCs.

Practical Implications for Consumers and Businesses

If a digital pound were to be launched in the future, it would have significant implications for consumers and businesses alike.Here's a breakdown of the potential impacts:

For Consumers:

• Easier and Faster Payments: Digital pound transactions could be faster and more convenient than traditional payment methods.
• Greater Financial Inclusion: A digital pound could provide access to financial services for those currently excluded from the banking system.
• Potential for New Services: A digital pound could enable the development of new financial products and services tailored to individual needs.
• Privacy Concerns: Consumers would need to be confident that their digital pound transactions are private and secure.

For Businesses:

• Reduced Transaction Costs: Digital pound transactions could be cheaper than traditional payment methods, reducing costs for businesses.
• Improved Efficiency: Digital payments could streamline business operations and improve cash flow.
• Access to New Markets: A digital pound could facilitate cross-border payments and expand access to new markets.
• Potential Disruption: Businesses would need to adapt to a new digital payment landscape.

The Importance of Addressing Public Concerns

As Bank of England deputy governor Jon Cunliffe has pointed out, a national conversation is needed to assuage public fears that a digital version of the pound would allow the government to spy on them.The government and the Bank of England have committed that they would not access users' personal data in a digital pound ecosystem.

Expert Perspectives: Gilbert Verdian on Misconceptions

Gilbert Verdian, CEO and Founder of a blockchain firm, has explored some of the misconceptions raised in response to the Bank of England and HM Treasury's consultation.He emphasized the importance of considering future developments in payments and money when assessing the need for a digital pound.

Addressing Common Questions about the Digital Pound

The concept of a digital pound raises many questions.Here are some common ones, with clear and concise answers:

• What is a digital pound? A digital pound is a central bank digital currency (CBDC) issued by the Bank of England, representing a digital form of sterling.
• How would it work? It would be held in digital wallets and used for payments in shops or online, seamlessly exchangeable with cash and bank deposits.
• Is it the same as cryptocurrency? No. Bank of England Governor Andrew Bailey questioned the need for a digital pound on Monday just as euro zone finance ministers backed further preparatory work on a digital euro.A digital pound is centralized and backed by the Bank of England, while cryptocurrencies are decentralized and unregulated.
• Why is the Bank of England considering it? To modernize payment systems, foster innovation, and maintain monetary stability in a digital age.
• What are the privacy implications? The Bank of England and the government have committed to ensuring privacy and data protection in a digital pound ecosystem.

Conclusion: A Deliberate Approach is Key

The question of whether the UK needs a digital pound is complex and multifaceted. Also appearing will be Sarah Breeden, deputy governor for financial stability at the Bank; Catherine L Mann, external member of the Bank's Monetary Policy Committee; andWhile Bank of England Governor Andrew Bailey raises valid concerns about the lack of a ""must-have"" reason, the ongoing consultation and the perspectives of other experts suggest that a digital pound could offer significant benefits in the future.The key lies in taking a deliberate and cautious approach, carefully considering the potential risks and benefits, and engaging in open and transparent dialogue with the public.Before any legislative steps, there must be public consultation and parliamentary approval.Modernizing payment systems, fostering innovation, ensuring financial inclusion, and maintaining monetary stability are all crucial considerations.Whether or not the UK ultimately adopts a digital pound, the debate surrounding it is forcing a critical examination of the future of money and payments in an increasingly digital world. The Bank of England (the Bank) and HM Treasury have today published their response to the consultation on a digital pound that was launched in February 2025.As the design phase continues over the next couple of years, the Bank and Government will continue to take into account developments in the wider payments landscape.

Key takeaways:

• Andrew Bailey questions the immediate need for a digital pound.
• HM Treasury and the Bank of England acknowledge its potential future necessity.
• Privacy and data protection are paramount concerns.
• The consultation process is crucial for shaping the digital pound's design.
• A digital pound could have significant impacts on the UK economy.

Stay informed about the latest developments in the digital pound debate. After completing the design phase over the next couple of years, including taking account of developments in the wider payments landscape, the Bank and Government willFollow the Bank of England and HM Treasury for updates and participate in public consultations. Bank of England governor questions need for digital poundYour voice matters in shaping the future of money in the UK.