According to the Bank of England’s fintech director, the technology behind central bank digital currencies (CBDCs) could be “tens of thousands of times more efficient per transaction” than bitcoin.
During his speech at the Future of FinTech Conference on Thursday, Tom Mutton gave attendees an overview of the Bank of England’s current standing on CBDCs. Much of Mutton’s speech reiterated the Bank’s noncommittal interest in the development of a CBDC and its purported commitment to keeping cash “available for as long as [people] wish to use it,” but he also addressed feedback from a 2020 survey on CBDCs done by the Bank.
Mutton provided the Bank of England’s counterpoints to concerns raised in the survey, including the need to preserve privacy, increase public trust and ensure equitable access to the technology.
He also addressed the concerns around energy and the environment, saying:
“Bitcoin, given its performance shortcomings and energy inefficiency, is in no way a relevant comparison for the sort of technology we might use in a central bank digital currency.”
Mutton urged eco-conscious U.K. citizens not to “throw the blockchain baby out with the Bitcoin bathwater.”
Mutton’s remarks come as bitcoin and other proof-of-work cryptocurrencies are being hotly debated for their impact on the environment. As companies like Tesla reverse their stance on bitcoin payments due to concerns over bitcoin mining’s carbon footprint, central banks are pressured to consider the environmental impact of CBDCs – even theoretical ones like the Bank of England’s.
According to Mutton, the Bank of England’s CBDC could play a role in the country’s transition to a net-zero economy. To do so, Mutton stressed that energy efficiency should be a core consideration in the design of the CBDC and come equipped with data and analytics technology that will allow the central bank to optimize the financial system to be as energy efficient as possible.