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Central banks get serious on digital currencies

CBDCs could boost government coffers, displace costlier taxation and improve the efficiency of payments
The writer is chief executive of Lateral Economics and visiting professor at King's College London’s Policy Institute

The Chinese are trialling it. The UK Treasury and the Bank of England have a task force on it. So, after years of talk, central bank digital currency has suddenly become serious business.

Think of CBDC as the digital equivalent of banknotes. In the early 19th-century, private banknotes were used in shops. With numerous banks issuing different notes, it was complex and confusing — and bank failure could render your notes worthless.

But, since the 1844 Bank Charter Act, things have been streamlined by the Bank of England issuing its own retail banknotes. That also levelled the playing field. The banks had always had access to a risk-free payments system between themselves via their own Bank of England accounts. But with banknotes — Bank of England IOUs — something similar was available to all.

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