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The creation of an official digital currency in the U.K. would hamper banks’ profits, says Moody’s Investors Service in a new report.

Last week, the Bank of England and the U.K. Treasury launched a task force to explore the possible creation of a central bank digital currency (CBDC), which would be used alongside traditional cash and bank deposits.

According to the rating agency, the launch of an official digital currency could have a number of positive effects for consumers and the financial system.

Depending on its design, an official digital currency could enhance the Bank of England’s “current tools to implement monetary policy and ensure financial, monetary and macro stability,” Moody’s said.

It also suggested that the development “would increase the resilience of payment landscapes” in the U.K. where payments are increasingly digital.

It’s predicted that only 9% of payments will be in cash by 2028, the report said.

For consumers, a central bank–issued currency “would also provide safer and more trustworthy payment services,” compared with other forms of crypto, such as Bitcoin, it said.

At the same time, the introduction of an official digital currency would likely have a number of negative effects for traditional banks.

It would intensify the threat of disintermediation, likely increasing funding costs, lowering fee income, net interest margins and profitability, Moody’s said.

“Customers would likely prefer the security of a CBDC’s risk-free nature and favour it over cash held in commercial banks’ current accounts,” it said. “A substitution of bank deposits for a CBDC risks tightening bank funding and subsequently increasing lending costs and disintermediation risk for banks.”

One of the central bank’s challenges with launching a digital currency would be to “ensure that it maintains funding for the economy given that banks have an important role in leveraging their deposit bases.”

Notwithstanding the likely negative effect on traditional banks, the introduction of a digital currency “would also support the U.K. financial sector’s status as a global, innovative and competitive financial hub,” the report said.

“The U.K. was an early adopter of open banking and fintechs have a strong presence there,” it said. “As a result, a CBDC could provide additional insight into customer behaviour, enabling banks, other financial intermediaries and fintechs to develop new products that expand customer choice and cut transaction costs.”