Blockchain and digital assets give people the ability to store their own assets, potentially putting the solution offered by banks at risk. However, according to Jon Cunliffe, deputy governor of the Bank of England, ensuring that banks remain relevant is not on the UK central bank’s to-do list.
“Our job is not to protect banking business models,” said Cunliffe in a Reuters report on Friday. “Banks have to adapt,” he added. “Our job is to make sure that we cope with the financial and macroeconomic consequences if banks’ business models change.”
Cunliffe noted that it was not the Bank of England’s responsibility to ensure that traditional banking operations remained relevant. Central Bank Digital Currencies (CBDCs) pose a threat to the solutions offered by commercial banks, eliminating them as intermediaries. Cryptocurrencies generally offer users the option of self-custody which challenges banks, although banks still act as entry ramps for fiat currencies.
China appears to be leading the CBDC race today and is already testing its digital yuan. CBDCs have far-reaching implications. “You have to get the political agenda up pretty quickly before the political side realizes that there are developments in the private sector that don’t really fit into politics.”Said Cunliffe. Cunliffe advises that governments around the world should prioritize discussions about these assets because of the changes they can bring.
Unlike other nations headed for the CBDC finish line, America’s leading financial regulators have denied the need to be first.