Sir Cunliffe highlighted that although central bankers are tasked with "forecasting the economic future," it is not "an easy task." Further, when attempting to maintain financial stability, central banks must be "forward looking" because as Sir Cunliffe explained, "while we cannot be certain how new technologies and social and economic trends will play out, we need to have though through in advance how the risks might need to be managed and, where the likelihood of major change is high, have the regulatory frameworks and powers in place."
In addition to this, "we want competition and innovation in financial services." It is evident that society is gradually moving away from publically-issued, Bank of England, physical money and towards electronic money issued by private sector banks. This is due to the digitalisation of everyday life, the implementation of Pay.UK's New Payments Architecture, RTGS, High Value Payment System and the expansion of the open banking framework, as announced at IFGS, as well as the technologies that have been refined in the cryptocurrency world such as tokenisation, encryption, distribution, atomic settlement and smart contracts.
Sir Cunliffe went on to discuss four areas where the tokenisation of money is now being explored: stablecoins being used for payments, the tokenisation of commercial bank deposits, the Bank of England’s work on issuing a Digital Pound and the Bank’s work to ensure these new forms of money are robust and uniform.
Stablecoins
While stablecoins offer the possibility of greater efficiency and functionality in payments, Sir Cunliffe stated that they "currently sit outside most of the regulated framework and it is extremely unlikely that any of the current offerings would
Read more on finextra.com