Bank of England exec says digital currencies could be 'important' for central bank balance sheets 

Quick Take

  • Andrew Hauser, the executive director for markets at the Bank of England, spoke about digital currencies at the Federal Reserve Bank of New York on June 1.
  • Central bankers should be prepared for “important implications” of stablecoins and central bank digital currencies, he argued.

A combination of “systemic” central bank digital currencies and stablecoins could significantly alter central banks’ delivery and control of monetary policy and the size and composition of their assets and liabilities. 

That’s according to Andrew Hauser, executive director for markets at the Bank of England. Hauser made the argument as part of a speech he delivered at the Federal Reserve Bank of New York on Wednesday.

The size of the effects will “depend heavily on the eventual design of any systemic digital currencies,” Hauser said. He also specified that digital currencies don’t present any “redline” risks for central bank balance sheets. Nonetheless, he argued that central bankers should start preparing for the “important implications” that central bank digital currencies (CBDCs) and stablecoins will have for their balance sheets by building responses to them into their operational toolkits.

Central banks — as the sole issuer of fiat currency — typically control the money supply of a national economy using three main devices: modifying interest rates, regulating commercial banks (by setting capital and reserve requirements), and acting as a lender of last resort. Money issued is considered a balance sheet liability, which can be bought back or sold to commercial banks as needed. 

Hauser outlined how CBDCs and other digital currencies could