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Tech firms could defeat banks on the crypto issue, says Bank of England official

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Updated on Mar 11, 2020
Reading time 3 minutes
  • The Bank of England's Chief Cashier stated that central banks need to quicken the pace of CBDC development if they are to beat the private sector.
  • As they are now, many banks around the world remain unconvinced that blockchain's role in the payment industry is as big as everyone says.
  • Others remain too cautious, and in their caution, they are beginning to fall behind the rapidly evolving market.

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For years now, tech firms that saw great potential in digital currencies and blockchain technology started implementing these decentralized solutions, but the traditional central banks always tried to block them from further development. These days, as crypto businesses gather more strength and influence, it seems that the situation is slowly beginning to change.

At least, that is what one senior official at the Bank of England recently said, stating that central banks need to speed up their development of CBDCs, or they will start to lose ground. The race for the leaders for the future of payments is on, and banks need to take it more seriously if they want to remain relevant.

The official in question is Sarah John, who acts as the chief cashier at the central bank. John commented on the situation in a recent article published by The Telegraph, stating that banks need to develop and deploy their solutions faster. She noted the ongoing work in the private sector, stating that it is imperative that the banks treat the issue with more urgency.

She also noted that the banks need to consider who would be best to provide digital currencies — the private sector, or the public sector?

The future of banks’ role in the financial industry causes concern

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John is not the only one who seems concerned about the slow pace that the banks are taking when it comes to CBDC development. FSB (Financial Stability Board) also published a similar statement even before John made her comments. The FSB also said that the sector is growing and evolving and that there might be some new vulnerabilities that need assessment.

This is why the FSB is creating a group that would consider what work should be considered appropriate, and whether or not there is a need to reorganize the existing work on non-bank financial intermediation. However, despite these warnings, many central banks remain slow and cautious.

The Bank of Canada’s Scott Hendry said he is not convinced of the DLT technology’s utility in payments. Similar views came from the Dutch central bank’s officials. Meanwhile, the private sector is gathering strength, and is making the moves to dominate the future of payments, and possibly push central banks out of the market completely.

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