BoE and Treasury think UK is ‘likely’ to need digital currency

© Reuters. FILE PHOTO: A general view of the Bank of England (BoE) building in London, Britain, August 4, 2022. REUTERS/Maja Smiejkowska

LONDON (Reuters) -The Bank of England (BoE) and Britain’s finance ministry think the UK is likely to need to create a central bank digital currency (CBDC) later this decade, the Telegraph newspaper reported on Saturday, citing an unreleased government report.

“On the basis of our work to date, the Bank of England and HM Treasury judge that it is likely a digital pound will be needed in the future,” the Telegraph quoted BoE Governor Andrew Bailey and finance minister Jeremy Hunt as saying in the joint report.

“It is too early to commit to build the infrastructure for one, but we are convinced that further preparatory work is justified,” the Telegraph quoted the report saying.

The BoE declined to comment on the Telegraph article, but said a joint consultation on CBDC issues would be published shortly.

A government source said the report would be published next week.

BoE Deputy Governor Jon Cunliffe is due to give a speech on Tuesday to update the finance industry on the BoE’s CBDC work.

Britain’s Prime Minister Rishi Sunak asked the BoE to look into the case for a CBDC in 2021 when he was finance minister, and in October financial services minister Andrew Griffith said Britain could not avoid the issue indefinitely.

A CBDC would allow a wider range of businesses – and potentially individuals – to hold electronic money in accounts directly with the BoE, potentially cutting out banks which have this right at present.

The Bank of International Settlements, a forum for central banks, said in June that CBDCs are needed to modernise finance and ensure Big Tech does not take control of money.

The Telegraph reported that the proposals being explored by the BoE did not include allowing individuals to hold accounts directly with it.

The European Central Bank is working on a digital version of its currency and is in the process of outlining the broader design. Last month it said it would not offer personal bank accounts but would allow person-to-person payments.

China has conducted the largest cross-border CBDC trial to date.