I clearly remember the two times that I have used actual cash in the last three years. Once was to feed quarters into the laundry equipment at the hotel where I was lodging while being an expert witness in Virginia. The second time was when a local bakery refunded me a pound in cash as it was easier than using the card machine. And that’s it.
The Bank of England’s recent announcement of a consulation on the creation of a Central Bank Digital Currency has driven a small froth of excitement, mainly from those who still think that cryptocurrencies are a good idea. Predictably some think that it is an evil, controlling plot to block their libertarian fantasies, others think it will provide some much needed respectability.
My main reaction is to wonder when and how I would notice any difference. From a skim of their consultation site, I would have to create a digital wallet with a private provider, transfer money from my bank account into that wallet and then… spend it as if it was in my bank account.
How does this proposal differ from existing digital usage of debit and credit cards? For someone such as myself in a comfortable financial position, what is the advantage? None that I can see.
Perhaps there are digital limits on spend to help the financially incontinent to avoid overspending, but this exists on bank accounts already. Those who live to stick it to the man might be happy that new private digital wallets would be used, allowing them to cut legacy dependency on existing banks. But in reality it just creates dependencies on the wallet provider, and while the digital pounds are in the sticky mitt of the Bank of England, the providers in the crypto world have not exactly excelled in customer service or preserving customer funds.
As usual there are claims that this will empower those who are excluded by the current financial world. From what I can see, however, it will actually make it even more difficult for them as they probably have limited access to the required technology, and in many cases lack the required skills.
As if that wasn’t enough, potentially moving large amounts of money from one banking system to another can seriously destabilise entire economies. I freely admit that finance is not a strength, but I’ve read David Gerard’s Libra Shrugged and it explains the problems better than I ever could.
At least the Bank of England initial pitch doesn’t claim that the magic beans of blockchain that will make it all wonderful.