Cash is going to disappear, says Bank chief
Pound coins will be replaced with state-backed digital currency, predicts deputy governor
CASH is going to disappear, a senior Bank of England official has warned, as he backed the creation of a state digital currency.
Sir Jon Cunliffe, the central bank’s deputy governor, said there are already parts of London that do not accept cash at all.
His comments come as the bank is considering plans to launch its own state-backed version of a digital currency.
Speaking on a podcast, Sir Jon said the rise of online commerce and the popularity of contactless credit cards was already squeezing the use of cash.
He said that authorities would need to adapt to ensure there is always a prominent state-backed financial system in the future.
“Central bank state-issued money is disappearing,” he said on The Swap podcast, from the International Swaps and Derivatives Association. “It’s no longer a full service settling assets. There are places in London where you can’t use it in face-to-face transactions.”
His comments come amid explosive growth in “decentralised” cryptocurrencies such as Bitcoin over the last few years.
The technology allows an online ledger of digital transactions to be kept in multiple places so cryptocurrencies cannot be fraudulently meddled with.
The worry with cryptocurrencies is that they could eventually wrest control of the money supply away from governments and central banks if they replace traditional cash and fiat money.
However, cryptocurrencies are not widely used as tender as they currently fluctuate wildly in value and are often not accepted as a payment method.
Sir Jon’s remarks have been seen as part of an effort by policymakers to garner backing from politicians and the public for a state-backed digital currency, which has been nicknamed “Britcoin”.
Proponents argue such a digital currency could offer people something that is as secure as cash, while being as flexible as cards and cryptocurrencies.
Unlike deposits in banks, Britcoin would carry the explicit backing of the government and would be designed to work with online payment platforms as well as to evolve with technology.
“These technological developments won’t stop just because we don’t provide a CBDC [central bank digital currency],” Sir Jon said.
“Cash is going to disappear, and the question is going to be what role can a CBDC play.”
He said that people think of money as pound coins or dollar notes, and that they need the safety of a governmentbacked currency in times of stress. A CBDC could perform the same role as cash without requiring consumers to handle the bulk of paper bills.
“On the downside there will be a hit to banks,” he added. “If people move their deposits into CBDC there will be a hit to banks, and banks will have to adjust. People will use it, but you don’t want them to use it in such a disruptive way that we can’t adjust.”
Rishi Sunak, the Chancellor, said earlier this year that he was yet to make a decision on Britcoin, but that any Ukbacked digital currency would not replace cash and instead act as a “complement” to it. Cash was the dominant way transactions were settled in the country until 2016 and since has slipped behind cards and other forms of payments, a Bank discussion paper showed in July.
The pandemic accelerated that trend and prompted warnings that it was becoming harder for people who rely on cash to use it.
Earlier this year the Financial Conduct Authority, the financial regulator, found that a quarter of people in rural areas needed to travel more than a mile to find a cash machine.
Meanwhile, the Royal Mint said it had to issue more than £50 million recently in low-value coins as it said people were hoarding them at home following the pandemic.