(Recasts, combines separate stories, adds details)
By William Schomberg
LONDON, May 13 (Reuters) - Bank of England Governor Andrew
Bailey said there might be a role for a state-backed digital
currency in Britain although there would be big implications
ranging from the setting of interest rates to privacy.
"It may well be that we do end up with a digital currency.
It's a few years off at the moment," Bailey said at a public
event organised by the BoE.
The use of cash was falling but creating a central
bank-backed currency would have significant impacts on the
financial system and beyond, Bailey said.
"Security, that is an issue for us. Privacy, that's a big
issue, a very big issue," he said.
Plans developed by Facebook for a digital currency "set off
a lot of alarm bells" about access to information, Bailey said.
Earlier on Thursday, Deputy Governor Jon Cunliffe said he
saw good reasons for a BoE digital currency.
British Finance Minister Rishi Sunak asked the BoE and other
regulators in April to look at the case for creating a central
bank digital currency to respond to the challenge from
cryptocurrencies such as bitcoin.
In his question-and-answer session on Thursday, Bailey also
said factors that were pushing up inflation would probably not
persist, but the BoE would watch the situation very closely.
"The really big question is: 'Is (higher inflation) going
to persist or not?' Our view is that on the basis of what we're
seeing so far, we don't think it is," Bailey said.
"We think there are reasons to think that the economy will
start to bounce back this year but it can't be sustained at that
level of growth," he said. "But we are watching it very
carefully.... Yesterday we had a very high number for inflation
in the U.S."
Asked about Britain's attempts to secure a post-Brexit deal
on financial services with the European Union, Bailey said there
was currently no prospect of an agreement on "equivalence" of
rules for the sector.
He repeated his view that London should not try to get such
a deal at any price.
"There's no lack of goodwill," Bailey said. "But if this
issue isn't sorted out then I'm afraid we will learn to live
without equivalence, that's the reality of it."
Officials from Britain's financial services sector say they
do not expect access to the EU's markets for the foreseeable
future.
(Writing by William Schomberg,
Editing by David Milliken and Alistair Bell)