TFT recently attended a Q&A with the Bank of England’s Head of Future Technology William Lowell after he confirmed that there won’t be a BoE digital currency for the foreseeable future. Here’s how that went…
What’s wrong with people taking their assets out of the system and putting it into digital form?
William: The way that most people keep their money and access payment system is to deposit in, in a commercial bank. That commercial bank then takes those deposits and lends them into the market and creates credit. Which is generally a public good, so that’s how people are able to raise money by borrowing it.
Won’t people also deposit money into banks and earn interest on it that way too?
William: Well, if they are able to hold a Central Bank digital currency, you can hold all your money in that. There’s then a question, and this is one of the design questions is, do you generate that, at bank rate or not. That there’s some research stuff in our website, that’s worth reading on that. Because I’m not super expert on it, but I know that’s one of the problems. There’s also, in times of stress, it it’s a very, very easy way to create a run on the bank effectively. You’ve got this digital asset, you don’t even have to go and queue up to take the bank notes out. You can effectively push one button, and if you’ve got a hundred thousand pounds, boom, it’s straight out. So those are the kinds of design issues that need to be overcome.
YOU CAN EFFECTIVELY PUSH ONE BUTTON, AND IF YOU’VE GOT A HUNDRED THOUSAND POUNDS, BOOM, IT’S STRAIGHT OUT. SO THOSE ARE THE KINDS OF DESIGN ISSUES THAT NEED TO BE OVERCOME.
Can you explain what is meant by compatible blockchain compatible?
William: What we mean by compatible blockchain? What we mean is as new platforms arise, that are moving assets on a blockchain, we are able to interface with that. So at the moment, if you want to interface particularly with a high value payment system, you have to connect to Swift network, and you have to send Swift messages. What we don’t want to do is, find that we have got platforms in the market where people are exchanging assets and then we’re saying, “Oh you’ve now got to retrofit this into the Swift network”, because it doesn’t really work and you missed a lot of opportunities to do greater levels of proof and so on. That’s what we mean by being compatible. We mean, being able to provide the interfaces that the movement of the money can fit with the overall business model of that platform. And then we don’t have to build something bespoke to do it. Does that make sense?
When is the expected delivery date for that?
William: The actual delivery of the external platforms, that’s more of a market driven thing. The UK has a fairly market driven approach to payments when you look at a lot of the retail schemes are, are not operated by the government or a government like entity like us. They operate within the market, and I think we see that a similar revolution in that. That’s what we want to be ready for.