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Do we need a "public currency"?



It has been more than 300 years since the UK issued banknotes. Jon Cunliffe, Deputy Governor of Financial Stability of the Bank of England, recently delivered a speech at the OMFIF Digital Currency Institute in London, reviewing the creation of British public currency and the development of private digital currency, and discussing the growing digitalization. The future of British currency in the world. The Institute of Financial Technology of Renmin University of China (WeChat ID: ruc_fintech) compiled the core content-zce of the speech. I want to talk today about whether we need a "public currency". It should be made clear at the outset that I am not talking here about public spending, but about the form of money itself: by "public money" I mean money that the state distributes to its citizens for everyday use.  This seems like a rather strange question.  In the UK, the Bank of England has been issuing currency to the public for more than 300 years. Its banknotes, bearing the famous "I promise to pay the bearer" promise, are placed in the wallets of millions of people and used by the public millions of times a day trade.  These notes and coins are denominated in British pounds, the British currency. On behalf of the country, the Bank of England is responsible for keeping inflation at a target of 2% to guarantee a stable value for the currency.  In the UK, public currency in general use is only available in the form of physical cash. It is ubiquitous, trustworthy and the image that many people in this country have in mind when they think about money.  However, most of the funds held and used by British people today are not physical "public currencies" issued by the state, but "digital private currencies" issued by commercial banks. About 95% of the money people hold is now in bank deposits rather than cash. In everyday use, only 23% of payments were made in public currency in the form of cash before the COVID-19 pandemic, down from almost 60% a decade ago.  These private currencies are not a claim to the state, nor a support for state resources, it falls outside the familiar Bank of England promise to "pay the bearer". I don't know to what extent the general public understands the difference between public and private money - and even most of the time, they use private money. I'm also not aware of any surveys or studies that address this issue.  Prince of Serbia: We need hard currency that is immune to inflation, and Bitcoin is the solution: Golden Finance reported that the Prince of Serbia said, "We need hard currency that is immune to inflation, and Bitcoin is the solution." [2023/1 /1 22:19:09] Over the years, I've been asking this question to people I meet. Of course, this approach is statistically reprehensible and policymaking should not be based on it. But the answers show that people often don't know the difference between private and public money.  And, outside of times of crisis, the type of currency they use, who is behind it, is not something they are particularly interested in.  In fact, unlike some times in history, we don't think about these things too much at the moment, and people in the UK have a general confidence in the currency they use, regardless of its form and issuer, I think , which is a good thing.  This was not an accident. It is precisely because of the credibility of the framework of the British monetary authority that it links the private currency to the public currency issued by the state. There are a number of important elements to this framework: an independent central bank ensures the stability of the value of the currency/unit of account; commercial banks that issue the currency are regulated to ensure its soundness. Commercial banks have accounts with the Bank of England, use public money issued by the Bank of England to settle their electronic transactions, and are able to borrow from the central bank to cover liquidity shortages, including in times of stress. At the same time, the deposit guarantee scheme provides protection against bank failure for holders of funds in commercial banks.  Crucially, the peg between private and public money is also due to the fact that people have the right to swap between their private and public money whenever they want - every time they go to an ATM or Pay with cash in your bank account without any restrictions or loss of value.  We need not look back when confidence in the public or private currencies used in the UK has been shaken. The Monetary Stability Framework has been in operation for less than 25 years, a period in which all public and private currencies denominated in sterling have been volatile in value.  The current banking regulatory framework and deposit guarantee scheme have their origins in recent experience. During the financial crisis just 10 years ago, governments were forced to bail out the banking system, at enormous cost, to save millions of citizens from losing money they held in claims against commercial banks - and subsequently confidence in private currencies general loss.  Cathie Wood: We need a Bitcoin ETF: Golden Finance reported that Cathie Wood said, "We need a Bitcoin ETF, which can save many people from the collapse of FTX." [2022/12/9 21:33:22] To be clearer, I think our reforms over the past 10 years have resulted in a more robust and resilient commercial banking sector. The experience of the past 12 months illustrates the resilience of the banking system to extreme economic shocks.  But these not-too-distant events underscore that threats to confidence in money, or a particular form of money, are more than just something in the history books. Money has always been a social convention that can be very fragile under stress. Money is not only a social convention, it is also very dynamic. The forms it can take and the ways in which it can be used vary substantially across histories and societies. Change is often driven by the interaction of technological innovations, which improve the functionality of money—for example, making it safer or more convenient to use.  Over the past few decades, we have been going through periods of such change.  On the money supply side, commercial banks, digital currencies are more accessible to the public, cheaper, and more widely used, especially for transactions with lower transaction volumes.  On the money demand side, convenience, especially in e-commerce, has fueled public demand for digital currencies. As a result, the use of public currency in the form of physical cash has been declining. These changes are evident in the UK, mainly in the form of the issuance of credit and debit cards to the public, the development of faster payment systems and the emergence of electronic money (derivatives of commercial bank money). Digital payments overtook cash in 2015 and now account for three-quarters of all payments, with debit cards alone accounting for 42% of payments.  Since the only digital currency available to the public is private commercial bank money, the shift from physical cash to digital payments in recent decades has meant a shift from public money to private money. These trends have been temporarily accelerated by the COVID-19 pandemic and the ensuing mandate to live, work and trade remotely. For example, a recent Bank of England survey found that 70% of respondents use less cash than before the pandemic, and that the public already makes heavy use of contactless payments and internet transactions. U.S. Treasury Secretary: The FTX incident shows that we need to regulate cryptocurrencies: Golden Finance reported that U.S. Treasury Secretary Yellen said that the FTX incident shows that we need to regulate cryptocurrencies. [2022/11/12 12:55:33] Of course, we don't know how long these changes will last after the epidemic has passed. However, I believe that the experience of the past 12 months will further accelerate the shift from physical to electronic/digital currencies, which is a relatively safe bet.  In recent years, the technological innovations that have made digital private currencies cheaper and more convenient in e-commerce and face-to-face transactions have been somewhat "outdated" and well-known. However, in the near future, there are some newer technologies and innovations, such as tokenization and distributed ledgers, that may further change the money we use.  Stablecoins are a type of encrypted asset, probably the most famous of them all. Proponents of stablecoins claim that they have the potential to radically reduce the cost of digital currencies, increase their "functionality" and "things they can do", embedding money more deeply into the digital world in ways we can only imagine right now.  The backers of these new forms of money are often not banks but technology companies, including so-called "Big Tech" internet platforms. Their business models are very different from banks: many companies have no interest in extending credit, but instead seek to integrate new forms of money into their other data-driven services.  This has drawn widespread attention from public authorities including the Bank of England, who are now grappling with the thorny question of what regulatory framework should apply to non-bank issuers of private money. (I am not going to go into depth on this today, the Bank of England will soon publish a discussion paper on the public policy implications of a non-commercial bank digital currency.) This development will lead to a further shift in the form of money away from cash and public money Private digital currency. Of course, this may never happen. However, after witnessing the digital transformation of other sectors of the economy, one can foresee the next wave of technology leading to a further major transformation: in payments, too, from the world of “Blackberry” to the introduction of “iPhone”.  The Bank of England is committed to producing physical cash and banknotes, available as long as there is demand, and is working with other authorities to support continued access to cash. I don't think the need for cash will completely disappear any time soon, many people still rely on it for a number of reasons, but cash, and public currency, is a smaller and smaller proportion of what we use in the UK and less and less usable in the digital world .   V God commented on Google’s mandatory share: We need to build our own app store and mobile operating system: In response to the news that Google will force the share of in-app purchases (IAP) from next year, V God commented that Google is forcing in-app The direction of payment has gone further than Apple. We need more competition in the app store and ultimately the mobile operating system, and we need it now. The U.Today article pointed out that it is not clear who he refers to by "we", which is Ethereum or the global encryption community. According to CNBC reports, Google said on Monday that it will start implementing app store rules next year, which require developers who publish Android (Android) apps on the Google Play store to use Google's in-app payment system. Google has given app developers a year to adjust, with a final deadline of September 30, 2021. At that time, developers will have to use Google's payment system and can no longer use its independent payment system, which means that Google will take a 30% share of its in-app purchase revenue. Google's existing policy also requires app developers to use Google's payment system for in-app purchase transactions, but it has not been enforced. (U.Today) [2020/9/29] In the UK, if we want to preserve a public currency that can be used universally and accessible to citizens, the country will need to issue a public digital currency to meet the needs of modern life.  It's not just a central bank problem: does it matter if the public doesn't have access to a public currency that they can use in their day-to-day lives? The current mix of public and private currencies in the UK is the result of history rather than some sensible policy decision. Some might say that generally available public money is becoming an anachronism. Given that we have the credible public power framework for private money that I talked about earlier, why would the state need to compete with the private sector to participate in issuing money to the public? Does the UK government no longer provide electricity or water directly to the public? Why does it provide currency? These are important issues that should not be ignored. Any decision that a country should issue a new form of digital currency to its citizens cannot be based solely on the fact that the role of public money in society is declining. It must be based on assessing the benefits of ensuring an accessible and usable public currency and the costs and risks of making it disappear. Voice | BB talks about EOS development: We need to be fast and efficient but not reckless: CEO BB tweeted: "EOS is one of the most useful and valuable blockchains in the world, and we have been actively upgrading the code Library, while patiently drawing governance conclusions. We want to be fast and efficient, but not reckless. EOS is just getting started, and we remain committed to its development and competitiveness, and more can be done through its concise mechanism.” [ 2019/12/29] Such an assessment has yet to take place in the UK, and no decision has been made to introduce a public digital currency - or to use its technical name, Central Bank Digital Currency (CBDC, Central Bank Digital Currency).  The introduction of a CBDC will be a very important public project that will have significant implications for the financial sector, many sectors of the economy and wider society. The Bank of England, like many other central banks, has been studying these issues in recent years. Last year we published a paper introducing an illustrative model for a general public digital currency. We will soon publish another discussion article on the public policy issues arising from new digital currencies.  At this year's UK FinTech Week, the chancellor announced the establishment of a task force led by the Treasury and the Bank of England to ensure a strategic approach between UK authorities to jointly explore the issues raised by CBDCs. I do not wish to predict the outcome of this work, but based on the work done so far, it may be possible to offer some of my initial thoughts on the possible benefits of a CBDC and, conversely, the possible risks of allowing public national currencies to disappear .  I then look at the future and the present, and the possible entry of non-bank private currency issuers, such as the "BIg Tech" platform. Given the pace at which payments technology is evolving, and the changes we're seeing in the way we transact, any assessment that isn't forward-looking is likely to be overtaken by events.  First, what are the financial stability implications of the lack of a public currency available to the general public? Ensuring public confidence in money as a means of payment and store of value is fundamental to financial stability. Does the existence of public money in the hands of citizens play any role in this?  I think there are two relevant areas for the answers here. First, the role played by the generally provided public currency ensures the perception of the unity of the British currency and the reality of the fungibility of all currencies used in the economy.


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Do we need a "public currency"?

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