Top policymakers in the United Kingdom recently addressed the prospect of a central bank digital currency. The UK group Positive Money writes about why this matters:
“Cash currently exists as notes and coins, which are estimated to make up just 3% of the UK money supply, with the rest of the UK’s money existing electronically. What many people don’t know is that most of this electronic money is not simply a digital equivalent of cash, as it is ultimately owned by private banks, that create it when they loan it out to us. … [Positive Money is] also proposing the introduction of [central bank] digital cash alongside physical cash. ...”
Positive Money continues:
“Like physical cash, and unlike the money in your bank account, digital cash — often referred to as a central bank digital currency (CBDC) — would be issued by the Bank of England, rather than by private banks through credit creation, and would be risk free.
“Digital cash could therefore save us from an economic system dependent on private banks acting as rent-extracting money creators. It would also help facilitate public money creation, among other advantages.
“The idea is being taken seriously by some of the world’s most important policymakers, as reflected by comments this week from the head of the International Monetary Fund, Christine Lagarde, European Central Bank board member Benoit Coeure and two Bank of England deputy governors, Dave Ramsden and Sam Woods.
“Christine Lagarde accelerated the debate on Wednesday, when she suggested“There may be a role for the state to supply money to the digital economy”through a CBDC. She said “The advantage is clear. Your payment would be immediate, safe, cheap and potentially semi-anonymous… And central banks would retain a sure footing in payments.”
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