Bank of England: Digital Currency Won’t Supplant Cash in UK

If the U.K. adopts a digital currency, citizens shouldn’t expect cash and coins to disappear.

That’s according to Bank of England Governor Andrew Bailey, who said Saturday (Oct. 26) that the central bank will continue to provide paper money “for as long as people want.”

“The evidence is they do want it, so we will continue to supply it,” added Bailey, whose comments at the Group of Thirty’s 39th Annual International Banking Seminar in Washington were reported by Bloomberg News.

The Bank of England (BoE) announced during the summer it was conducting a series of experiments with CBDCs — dubbed the “Britcoin” — for retail use by consumers.

In a discussion paper published in July, the BoE cited growing innovations and risks in the payments industry and said that “central banks must be quick to engage with them and prepare for their implications.”

In addition to CBDCs, the central bank plans to use distributed ledger technology (DLT) in its experiments. The rise of cryptocurrencies and the DLT that they operate on has led central banks worldwide to determine how they can weave these innovations into their operations.

“Our programme of experiments would be grounded in a set of policy outcomes which we seek from innovations in wholesale central bank money,” the bank said in the paper. “The programme would cover both wCBDC (wholesale CBDC) and synchronization, as well as the relative merits of these two approaches.”

In his speech Saturday, Bailey said that although his bank is cautious about releasing a retail CBDC, he is in favor of a wholesale CBDC used by institutions.

On the notion of a retail CBDC, he said it was “harder to see an anchor role for central bank money,” while adding that there is an argument for a “special role” for “central bank money in wholesale high value payments and in settlement of payment systems.”

The U.K. isn’t the only jurisdiction where people aren’t ready to give up paying with physical currencies. As noted here in August, half of all consumers in Germany say they prefer paying with cash.

And research by PYMNTS Intelligence from earlier this year found that many lower-income consumers prefer to purchase items using cash and debit cards.

“Paying for items with cash and debit cards can reflect a deeper concern about financial stability,” PYMNTS wrote. “And the fact that cash and debit card activity is on the rise for younger and lower-income consumers — up 34% from last year for groceries alone — suggests these two groups are being especially budget-conscious right now.”