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A surprising proposal by the Bank of England, and my response to it!


The Bank of England has just published an astonishing proposal. It plans to compete with the emerging growth of independent private cyber-currencies by creating its own “digital cash”. It has announced this intention in a “consultation paper” - comments are invited before 12 June. This is the link -

The value of this CBDC will be directly linked to the nominal value of cash. In it's most simple variant the Bank of England will operate its own “ledger” to record the holdings of each individual who has exchanged cash or bank deposits for CBDC. This “ledger” will be secure and trustworthy (says the Bank). The Bank will know the true identity of those holding CBDC but those receiving payments need not – this is for anti-terrorist and money laundering reasons. Access to the ledger will be protected by cryptographic keys. The Bank will encourage private firms to create a payments infrastructure using the new currency.

It is not clear from the consultation how the operation of this (large) system will be financed – possibly be a small percentage levy on transactions.

The Bank admits that the existence of CBDC is likely to remove significant amounts of cash from existing bank deposits held in high street banks. CBDC can obviously be used to make payments directly electronically (smart phones) without involvement of the conventional banks.

The consultation paper makes a more or less token reference to block chain (Distributed Ledger) technology but essentially assumes users will “trust” the Central Bank, making use of DLT un-necessary. Access to your CBDC will require crypto keys.


It looks like the Bank of England is trying to provide an attractive alternative to the growing use of crypto-currencies which are potentially so dangerous for central governments. Reading between the lines, the Bank also realises that CBDC would provide the potential for what it calls “unconventional” monetary tools (perhaps “helicopter money”?).

Certainly the option to be able to make electronic payments with a “cash-like” digital money (using smart phones/computers) WITHOUT INVOLVEMENT OF THE HIGH ST BANKS would have its attractions. But there is no anonymity (like cash) and many will question whether they can really trust the Bank of England either for absolute security or providing data for the tax and security authorities. And we don't know yet what the transaction costs might be.

An effective CBDC would really be the nail in the coffin for most High St banks – perhaps this is a scenario which the Central Bank already anticipates. It would also bring the abolition of ordinary anonymous cash a step closer – which governments would welcome and most thinking people would oppose.

This initiative by the Bank of England is a surprise! It could be the beginning of a completely new way to manage money, saving and payments. The announcement seems to have “crept under the radar” as far as conventional new media are concerned. I have seen no sensible or constructive comment about it anywhere.


This is a far reaching and radical initiative - probably long overdue. CBDC would be an extremely powerful policy tool which could be used equally for “good” or “evil” - depending on how it is controlled.

METHODS OF CONTROL - The present “fuzzy” relationship between the Bank and Government is profoundly unsatisfactory. This relationship would not be “fit for purpose” when it comes to managing CBDC in the best interests of the nation. We must discount the idea of giving control to a government elected on the basis of populist democracy. History shows that such politicians are always tempted to manufacture boom and bust events to boost their election chances. The Bank should take advice from the Sortition Foundation on how a well resourced “Citizen’s Assembly” could take this role.

IMPACT ON HIGH STREET BANKS - CBDC would almost certainly be the final straw for the out-of—date and out-of-touch retail banks. The traditional banking system has already lost touch with its vital role in providing sensible credit for trustworthy entrepreneurs seeking to provide work in local communities. You can borrow £200k to buy a house but not £2000 to finance a new small business. Hopeless.

POTENTIAL LINKS WITH CREDIT UNIONS - Arrangements could easily be made to augment the lending power of local credit unions by making CBDC available to them subject to sensible conditions. Credit Unions are anchored in local communities unlike todays centralised and profit hungry commercial banks. The nation needs investment in business NOT extra housing and stock market booms.

UNCONVENTIONAL MONETARY POLICIES - In the post-corona era economic growth will no longer be a talisman of success but rather an indicator of planetary exploitation and mis-management. To assist this change the world urgently needs to abolish bank money based on debt and move to “sovereign” debt free money issued by governments NOT commercial banks. The use of CBDC would much facilitate such a switch. You will be familiar with the arguments put by “Positive Money”.

HELICOPTER MONEY” AND NEGATIVE INTEREST RATES - Here again CBDC would enable the central bank to stimulate spending directly - or restrict it (by offering savings incentives) - in a much more “hands on” way than ineffective QE. It would take out the middle men (commercial banks and financial institutions). This would enable many of the basic monetary difficulties identified in Silvio Gesell's work to be avoided. All this will be extremely important in the post-corona world.

USE OF DISTRIBUTION LEDGER TECHNOLOGY - This does not seem necessary as the Central Bank already has the highest possible credibility with the public. People would trust the Bank without the need for this complication. There would, however, be a need for cryptographic protection of individual accounts.

THE VITAL IMPORTANCE OF “CASH” - Any nation which abandons use of cash must open itself to the potential of an Orwellian future where almost every action of the individual can be easily controlled by a central authority. “Good intentions” are an extremely dangerous luxury in this scenario and the Bank should emphasise again and again its commitment to the freedom of the individual.

As an ex- Treasury senior civil servant I would be happy to discuss any time!

William Sutherland

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