Former Economist Slams Digital Pound Initiative

Digital Pound Initiative Criticized by Former Bank of England Economist

A former Bank of England economist has expressed strong reservations about the digital pound initiative, calling it a costly project with unclear benefits and no customer demand. Neil Record, in an op-ed, argued that the push for a digital currency is more about protecting the central bank’s financial model than addressing any real public need.

Record cited the Bank of England’s concerns about the decline in cash use, which affects its income, as the primary motivation behind the digital pound initiative. He noted that the interest foregone by holders of notes and coins is the Bank of England’s principal source of income, and a world where cash is rarely used would significantly damage the Bank’s economic model.

“A world where cash becomes rarely used, and not widely held, would fundamentally damage the Bank of England’s economic model, and hence its existence in its current (independent) form.”

Lack of Customer Demand and Competition from Existing Services

Record pointed out that many British consumers already have access to secure digital payment systems through banks and mobile platforms. He believes that a government-backed digital currency, offering no interest and designed for everyday transactions, would struggle to compete with existing services.

“So a Central Bank offering that looks to the customer very like a current bank current account would struggle to be appealing. U.K. current accounts can, and often do today, offer interest on balances.”

Privacy Concerns and Lack of Customer Appeal

Record also raised concerns about privacy issues, as many consumers would likely distrust the BoE’s involvement in their financial affairs. Despite spending £24 million (over $30 million) so far, Record believes the digital pound lacks customer appeal and urges the Bank of England to focus on its core responsibilities, like inflation control.

Background of the Digital Pound Initiative

The Bank of England and HM Treasury first announced plans to explore the creation of a digital pound in 2021. Since then, the project has advanced with consultations and discussions, though no final decision has been made yet.

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