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Bank of England’s Andrew Bailey Hints at CBDC Backup if Traditional Banks Stall on Payments

In a recent speech at the Group of Thirty’s International Banking Seminar, Bank of England (BOE) Governor Andrew Bailey threw out a cautionary note to commercial banks. As digital payments climb, Bailey laid out the central bank’s vision: either traditional banks ramp up innovation, or the BOE might just move in with its own central bank digital currency (CBDC). Bailey’s sentiment is clear; he wants banks to take the lead, but if they don’t keep up, the BOE stands ready to fill the gap.

Bailey sees the future of digital payments ripe with possibilities—enhanced cross-border ease, cheaper transactions, and smoother transparency. Yet, he points out that banks have been slow to drive these changes forward. And that’s where a BOE-backed digital pound could come in, potentially upending the traditional banking scene if needed.

BOE’s Digital Strategy: A CBDC to Backstop Retail Payment Innovation?

Bailey’s not the sort to pull punches. “For me, this justifies why we must continue to prepare for retail CBDC,” he stressed. He’s made it clear that if innovation stalls, the BOE won’t hesitate to shift gears. Central banks, he argues, can’t sit idle if commercial banks drop the ball on retail payment modernization. Bailey’s statement says it all: “If for some reason innovation is unlikely to happen, then the central banks have to decide whether they are the only game in town.”

But there’s a twist; he doesn’t see CBDCs as the first choice. Bailey’s game plan still has banks as the primary innovators—his hope is for them to carry the digital evolution without central bank intervention. However, he’s prepared to call CBDCs into play if progress falters. The BOE’s eyes are on how banks evolve, how they meet user needs, and how they tackle the digital shift sweeping payments.

For the BOE, the ball remains in the commercial banks’ court. Yet, Bailey made it clear: “Absent innovation in commercial bank money, central banks may be left as the only game in town.” And that, while not Bailey’s ideal scenario, is an outcome he won’t hesitate to consider.