The Bank of England (BoE) has signaled it may roll out a central bank digital currency (CBDC) if commercial banks struggle to keep up with the evolving digital payment landscape. BoE Governor Andrew Bailey outlined this stance during a speech at the Group of Thirty’s Annual International Banking Seminar in Washington, stressing the potential role of a CBDC in modernizing payments if traditional banks fall behind in innovation.
Bailey highlighted digital technology’s potential to address long-standing inefficiencies in cross-border and wholesale payments, offering faster transactions, reduced costs, and greater transparency.
He emphasized that while commercial banks are in a prime position to drive retail payment innovation, the BoE is prepared to step in if they do not meet user needs.
“If for some reason innovation does not take place, then central banks may be the only game in town,” Bailey remarked, adding that the BoE must keep preparing for a possible retail CBDC if private banks lag.
“We must continue to prepare for retail CBDC,” he said, noting insufficient evidence that commercial banks will fully drive the necessary advancements in payment solutions.
Bailey’s comments reflect a growing concern that without significant advancements in commercial banking, central banks may need to take a more proactive role in the payments landscape.
Bailey underscored that digital technology could enhance efficiency, reduce costs, and improve transparency within payment systems. He noted that for commercial bank money to function effectively, it must adapt to the evolving needs of users. The BoE is closely monitoring trends in payment technologies and user preferences as part of its work on retail CBDCs.
“Absent innovation in commercial bank money, central banks may be left as the only game in town insofar as retail payments innovation is concerned,” he remarked.
The Bank of England has been exploring the feasibility of a CBDC since at least February 2023. A formal consultation was launched to gather public feedback on design proposals for a potential digital pound, which received over 50,000 responses highlighting various concerns, particularly around privacy and user trust.
The design phase is expected to continue until at least 2025, with a decision on whether to proceed to the build phase anticipated around that time. If approved, the earliest launch of the digital pound could occur in the latter half of 2025 or beyond.
The BoE plans to work closely with HM Treasury and other regulatory bodies during its CBDC experiments. This collaboration aims to ensure that all forms of currency—digital or otherwise—are interchangeable and can meet the needs of users effectively.
The BoE has committed to safeguarding user privacy within any future CBDC framework. Legislation will be introduced to ensure that neither the government nor the Bank will have access to personal transaction details.
