William Lovell, Head of Future Technology at the Bank of England (Event Report)
On Wednesday 24th of November, the OFLS hosted an interview and Q&A session with William Lovell, the Head of Future Technology at the Bank of England. Mr Lovell provided to us his valuable insights into the impact of new technologies on the financial sector and how the UK’s central bank plans the future, taking into account the current and upcoming changes in the financial system.
In practice, there is so much going on in the payment system and central’s bank digital currency, in parallel with artificial intelligence. A joint committee was formed, which is chaired by the BoE and the Treasury, in order to coordinate the development of central’s bank digital currency across different parts of the Government and the different authorities, indicating that this kind of currency has wider implications than the narrow financial considerations within central bank.
According to Mr. Lovell, within the UK, where a mature payment system exists, there is an actual question on the need for a digital currency. However, a definite decision on the launch of it has not yet been taken. One of the factors is that there are areas in the city centres now where cash usage has declined substantially (small retailers are not accepting cash anymore, since they don’t want to incur the cost of handling cash). So, electronic payments overtook physical cash payments. Pandemic accelerated that a lot. Therefore, cash is gradually coming out of the economy.
This is not to say that the BoE has a policy of turning completely to digital currency. The above statement expresses the declining in the cash demand (consumer behaviour perspective). Also, the digitalisation of the economy plays a significant role as well (people buying services that can be delivered over the internet). Several technologies have been adapted to the new online payment conditions.
In addition, Mr. Lovell spoke about the CBDC Technology Forum which engages stakeholders and gather input on all technology aspects of CBDC from a diverse cross-section of expertise and perspectives. The Forum purports to have an important role in helping the Bank to understand the technological challenges of designing, implementing and operating a CBDC.
Cryptoassets were also discussed as they combine new payments systems with new currencies that are not issued by a central bank. Examples of privately issued digital currencies include Bitcoin, Ether (Ethereum) and XRP. Thus, economics of digital currencies opens in a new window and innovations in payment systems and the emergence of digital currencies.
Mr. Lovell mentioned inter alia that the Bank’s Financial Policy Committee has assessed cryptoassets and concluded that they do not currently pose a risk to monetary or financial stability in the UK. However, cryptoassets do pose risks to investors and anyone buying cryptoassets should be prepared to lose all their money. He also highlighted the objectives for a UK regime for crypto-assets, including protecting financial stability; ensuring consumer protections; and promoting competition and innovation.