The deputy governor of the Bank of England (BoE) believes the digital pound could rescue citizens during a bank run, comparing it to the first-generation iPhone.
Jon Cunliffe, the Deputy Governor of the U.K.’s central bank, was addressing the Parliament’s Treasury Committee and highlighted how a central bank digital currency (CBDC) could have its uses in a bank run. A bank run is when customers rush to withdraw money from a bank due to fear of its failure.
According to Bloomberg, the Deputy Governor considers the CBDC gives consumers a “safe place” to store value in “an era of instantaneous bank runs.”
Digital Pound Would be Financially Stable
Cunliffe admits that the digital pound could intensify a bank run as customers could swiftly withdraw their money from a bank. But the customers would win in the end by getting custody of their funds.
He says, “Actually, a CBDC has financial stability benefits because it provides another payment system in terms of resilience, but it also means that if we ever have to deal with failed banks again, there is another asset that people can go into.”
Historically, governments had to bail out banks on a number of occasions. Cunliffe gave the example of the U.K. government bailing out the Northern Rock and Royal Bank of Scotland because “60% of people’s money” was stuck with these banks.
Is CBDC Like First iPhone?
Cunliffe states that in the current state, it is difficult to explain the problems solved by a CBDC specifically. But, the U.K. is preparing its payment system for the future.
He explains his point by comparing CBDC with the first-generation iPhone. He elucidates that the first version of the iPhone offered similar use cases to other phones. But eventually, the iPhone upgraded and offered features such as the App Store.
Yesterday, Ben Broadbent, the Deputy Governor for Monetary Policy at BOE, emphasized the benefits of CBDC for businesses, institutions, and individuals. The BOE and Financial Ministry have released a consultation paper on CBDC that closes on Jun. 7, 2023.
But, some crypto enthusiasts have been opposing the CBDC narrative. A Twitter user commented, “A CBDC will give government the greatest tool to control all citizens.”
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