Having Andrew Bailey as a newly appointed Governor of the bank of England, taking over from Canadian Mark Carney, one of the plans to land on the desk of the new central bank boss will be the possibility of a ‘digital pound’.
In a press release on Jan. 21, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Sveriges Riksbank and the Swiss National Bank, together with the Bank for International Settlements (BIS), had joined forces to assess the potential cases for central bank digital currency (CBDC) in their home jurisdictions.
While online banking and card payments quickly surpassing notes and coins as the dominant way for most transactions, central banks are increasingly searching for ways to ensure that a decline of cash in circulation does not put pressure on the overall money supply, potentially causing issues for inflation and the ability of the payments system to respond in a crisis.
Sweden is currently grappling with a sharp decline in cash use as more and more of its citizens opt for electronic payments, with card transactions making up 58% of all payments as opposed to just 6% which were made in cash.
To get around this, central banks are teaming up to assess the potential of developing their own digital currencies. However, digital national currencies are unlikely to spell the end for physical cash, with some jurisdictions such as New York, San Francisco and Philadelphia all banning cashless businesses in an effort to protect spenders that may be unable or unwilling to use electronic payments such as the elderly or disabled.
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