Andy Haldane: “CBDCs Could Destroy the Fundamentals of the Banking System”

Bank of England chief economist Andy Haldane resigns from his post. In his farewell speech, he touched on government cryptocurrencies, noting that they could destroy the foundations of the banking system.

Andy Holden, who has worked at the Bank of England for over 30 years, stressed that the widespread use of digital currencies will affect the banking system at a fundamental level.

“This could lead to the fact that the banking business will be divided. Secure payment transactions will be separated from risky credit-related transactions. In other words, the traditional banking model, which has existed for more than 800 years, could be destroyed, ”Haldane said.

Back in November last year, the Deputy Governor of the Bank of England Sir John Cunliffe (John Cunliffe) said that the regulator is not going to protect commercial banks from digital currencies. And Haldane supported his colleague. In his opinion, changing the very foundation of the banking system can be beneficial.

“This could lead to better risk matching for institutions that offer these services. The division into highly specialized payment banking and credit-related banking is a radically different topology. While there will be additional costs, it will reduce the vulnerabilities of the banking model that have led to financial crises over the past 800 years. Given the harms of such crises, the benefits of CBDC need to be weighed well, ”Haldane said.

In November, the chief economist at the Bank of England said government digital currencies could improve the stability of the economic system and reduce the need for negative interest rates.