Sarah John, Chief cashier of the Bank of England (BoE), said that central banks have to research digital currencies so they can strike a balance with private issuers.
She said it was “really important” that BoE and other central banks considered whether digital currencies could form the basis for a new payment system and, if so, “quicken the pace” on how the new asset class should be regulated.
The BoE needs to consider its position on the technology to ensure the U.K. has “a broad range of payments that it can use with confidence,” John said. “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.”
John, who is responsible for issuing banknotes in the United Kingdom as the chief cashier of the BoE, said it was “so crucial” that central banks also determine how to define the role of private companies issuing their own cryptocurrencies, such as Facebook with the Libra project, in the future.
The BoE was one of seven financial institutions which co-founded a new working group in January to share research and findings into digital currencies (CBDCs) of central banks.
Central Banks To Increase Knowledge of CBDCs
Other members of the working group include Sweden’s Riksbank, said it would increase knowledge of CBDCs by testing the digital currency in a series of scenarios and stress tests.
Sources have also told the Japan Times that the Bank of Japan (BoJ) – another working group member – has held several meetings with the Finance Ministry and Financial Services Agency (FSA) to discuss the potential economic effects of digital currencies and move forward on collaborative research.
BOJ governor Haruhiko Kuroda said: “We are advancing research and study from the technical and legal perspectives so that we will be able to move in an appropriate way when there is a growing need.”
Japanese politicians have previously expressed concern that digital currencies, such as the one China is developing, could seriously challenge the existing economic order based on the dollar. Though there were no plans to launch a digital currency, the deputy governor of the BoJ said they laid the groundwork by researching the technology in January.