UK May Need Digital Pound, Bank of England's Jon Cunliffe Says

The deputy governor said FTX's collapse highlights the need for more oversight of digital assets.

AccessTimeIconNov 21, 2022 at 11:50 a.m. UTC
Updated Nov 21, 2022 at 4:19 p.m. UTC

Jon Cunliffe, deputy governor at the Bank of England (BoE), said the U.K. may need a digital British pound as he discussed whether the collapse of crypto exchange FTX would influence the country's decision to issue a government-controlled digital currency.

Although he initially thought there was no connection between the FTX debacle and the central bank's work on a central bank digital currency, Cunliffe said on Monday that he understands the concerns.

"Over the past few days, I have had a few comments both to the effect that the collapse of FTX shows that we need to get on and issue a digitally native pound – and to the effect that FTX shows that we do not need do so," Cunliffe said at a conference at the Warwick Business School in Coventry, England.

FTX in particular is "emblematic of these new technologies and the possibility that they might revolutionize financial services and the forms that money takes," Cunliffe said.

Sam Bankman-Fried's multibillion-dollar crypto enterprise filed for bankruptcy in the U.S. on Nov. 11 after a liquidity crunch set off by a CoinDesk article led to its collapse.

On Monday, Cunliffe said that crypto needs to be regulated in the U.K. to protect consumers and investors, ensure financial stability and enable innovation. Cunliffe has previously called for existing financial regulations to be extended to cover crypto.

Legislation now being considered in Parliament would set up regulations for crypto as financial instruments and give U.K. regulators – including the BoE – more control over the sector. If the bill becomes law, the BoE would regulate firms that issue stablecoins, which are digital tokens whose value is pegged to stable assets like the U.S. dollar.

The central bank will kick off a consultation on stablecoins next year that will look at "the requirements for corporate structure, governance, accountability and transparency necessary" to meet the standards expected in other parts of the financial system, Cunliffe said on Monday.

"The FTX example underlines how important these aspects are," he said.

The BoE has also been exploring issuing a digital pound. Its work on a "digitally native pound" is driven by trends in payments, Cunliffe said, "including the reducing role of cash, and more generally in the increasing digitalization of daily life."

"Our approach as regulators should be open – by which I mean we should be prepared to explore whether and if so how the necessary level of assurance equal to that in conventional finance could be attained. But we should also be firm that where it cannot, we are not prepared to see innovation at the cost of higher risk," Cunliffe said.


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Camomile Shumba

Camomile Shumba is a CoinDesk regulatory reporter based in the UK. She previously worked as an intern for Business Insider and Bloomberg News. She does not currently hold value in any digital currencies or projects.

Sandali Handagama

Sandali Handagama is CoinDesk's deputy managing editor for policy and regulations, EMEA. She does not own any crypto.