- The Bank of England has already spent £24 million on the digital pound project
- Neil Record, a former BoE economist said the bank is “no nearer to a digital pound being launched”
- Record believes the project is more for the bank than the public
A former Bank of England (BoE) economist has said there’s “no customer demand” for a UK digital pound.
In an op-ed in The Telegraph on March 3, Neil Record discussed the BoE’s central bank digital currency (CBDC) initiative, which was proposed four years ago. According to Record, getting the digital pound off the ground has been costly for taxpayers with the BoE having already spent £24 million on it.
He added: “We appear to be no nearer to a digital pound being launched…This is a great deal of money for a project for which there is apparently no customer demand, and no output yet apparent.”
Protecting the banks
Over the past several years, how the UK public spends its money has significantly changed. In 2013, for instance, cash payments accounted for 51% of all transactions; however, in 2023, that figure had fallen to 12%.
Record wrote that the COVID pandemic between 2020 and 2022 boosted technological developments, including a rise in contactless payments. He argues that the UK digital pound is more for the bank than the public.
“There are lots of fine words in the 2023 consultation, but none of the reasons quoted seems to me to be compelling enough to set up a major financial project,” Record added. “My instinct is that the Bank feels threatened by the secular fall in cash use, as the interest foregone by holders of notes and coins is the Bank of England’s principal source of income.”
No incentive to change
Record continues by saying that if the digital pound did exist, it would function similarly to how modern contactless or online payment systems do now. Why would the public switch when they already have this with banks or newer online payment platforms?
Consequently, a government-backed project that offers no interest “would struggle to be appealing,” he said.
Apart from this, one major deterrent is that the public will be suspicious of a government project and that the BoE won’t be able to protect their privacy.
“People value their privacy, and however much the Bank of England might protest, they would regard this as under threat,” Record said.