No ‘Red Line’ Against Central Bank Digital Currency, BoE’s Hauser Says

According to Andrew Hauser, the Bank of England's executive director for markets, a central bank digital currency would not pose a significant obstacle to the bank's operations.

According to Andrew Hauser, the Bank of England's executive director for markets, a central bank digital currency (CBDC) would not pose a significant impediment to the bank's operations.

The BoE is expected to consult this year on whether it should develop its own digital currency — a rival of sorts to cryptocurrencies like bitcoin – following encouragement from finance minister Rishi Sunak to investigate a potential ‘Britcoin’.

According to Hauser, a central bank digital currency would be the first new sort of central bank obligation in centuries, but one that would not conflict with the BoE's objectives.

Hauser remarked ahead of a debate organized by the Federal Reserve Bank of New York, "The dog may be old, but it can still do new tricks."

"Balance sheet issues by themselves do not seem to provide any'redline' reasons against CBDC implementation," he noted. "One of our oldest duties is to utilize the central bank's balance sheet to supply state-backed transactional money."

The Bank of England has said that any CBDC would not replace cash and will have the same value as pound banknotes.

The Bank of England regards sterling reserves held by commercial banks as a type of digital currency, and a fully-fledged CBDC as a broader form of public access to this system, potentially reducing banks' role in day-to-day payments.

Western central banks’ interest in CBDCs has been fueled by the chance that a large internet corporation would launch its own form of payment. This might circumvent the established banking system, raising privacy and financial stability issues.

If a corporation chooses this path, it should expect to be regulated similarly to a bank, according to Hauser.

Existing Stablecoins, which are cryptocurrencies that are tied to a mainstream currency or commodity, did not fit these criteria, according to Hauser.

"Holders of such currencies must accept at least the prospect of losing a lot of money," Hauser said, noting the recent collapse of TerraUSD and a brief drop in the value of the more frequently used Tether as examples.