Bank of England Official: Central Banks May Fall Behind Private Tech Companies With Providing Payments Services

On February 22, The Telegraph published an article, detailing the stance of Bank of England (BoE) chief cashier Sarah John on government-issued digital currencies. She called for central banks to pay attention to central bank digital currencies, as private companies take action in the digital payments sector.

According to John, it is is “really important” for central banks to consider central bank digital currencies (CBDCs) “as an option” in response to major tech companies’ attempts to create stablecoins.

The BoE chief cashier said that by staying inactive central banks may thrust themselves in a catch-up with private companies in the realm of digital payments. She maintained:

“It is absolutely right that central banks think about whether a public sector or private sector would be best to provide a digital currency going forward.”

Financial Stability Board urges central banks to speed up CBDC creation as private companies progress

Several days ago Financial Stability Board (FSB) Chair Randal Quaries stressed that G-20 members have to hasten development of regulatory framework for digital currencies and stablecoins.

He sent a letter to central bank governors and finance ministers, emphasizing that innovation in the digital payments and nascent stablecoin realm is fast, which means that regulators have to “quicken the pace of developing the necessary regulatory and supervisory responses to these new instruments.”

He continued:

“As this sector grows and evolves, there may be new vulnerabilities that need assessment. The FSB is forming a group to consider what work is appropriate and whether to reorganize existing work on non-bank financial intermediation.”

On February 23, the G-20 published a press release saying that “global stablecoins […] need to be evaluated and appropriately addressed before they commence operation,” and pledging support for the FSB’s “efforts to develop regulatory recommendations” relevant for digital currencies.

The press release also asks the FSB to create a roadmap to improve global cross-border payment arrangements by October 2020.

Central banks have different opinions on state-backed cryptocurrencies

In January, BoE established a group together with five other central banks to research government-issued cryptocurrencies, hoping to prevent Facebook’s proposed cryptocurrency Libra from undercutting the monetary hegemony of national governments.

The group includes the central banks of Canada, the EU, Japan, Sweden, Switzerland, and the Bank for International Settlements, and is headed by the BoE deputy governor Jon Cunliffe and former European Central Bank (ECB) executive Benoît Coeuré.

However, many central bank representatives present on a recent conference held by the National Bank of Ukraine in Kyiv expressed caution about CBDCs, and Bank of Canada senior special director of fintech Scott Hendry stated:

“There doesn’t seem to be a lot of benefits if you look at a DLT system and the current efficient centralized system for the sole purpose of interbank payments.”

Harro Boven, policy advisor in the payments policy department of the Dutch central bank, voiced a tough question inherent to CBDCs at the conference, saying: “The essence of the DLT infrastructure is that no single party should be trusted enough, but don’t we just trust a central bank to maintain the integrity of the global ledger?”

A report shared by CryptoTheNews earlier this month showed that not all central banks are interested in digital currencies.

Citizens regard tech giants’ digital currency plans with skepticism

In the beginning of this month, a poll conducted for the Official Monetary Financial Institution Forum (OMFIF) showed that most citizens globally are not enthusiastic about digital currencies developed by tech companies, with 51% of the respondents saying that central banks would be the most trusted entity to introduce digital currencies.

David Marsh, the chairman of OMFIF, said that traditional financial institutions are “preparing uneasily for an assault on their established market positions,” adding that tech companies are “limbering up for an aggressive campaign to build up their payments businesses.”