As 2023 progresses, we are coming to know more about what the UK’s approach could, and will be to digital currencies, including the long-rumoured “Britcoin”.
In early February, another highly significant step was taken, as the UK Treasury and the Bank of England confirmed that they were consulting on a potential “digital pound”, or central bank digital currency (CBDC).
What does the latest ‘digital pound’ announcement mean… and what does it not mean?
In a news release on Tuesday 7th February, HM Treasury confirmed its launch of the consultation, which it said would be open to comments until 7th June 2023.
But of course, it is important for anyone engaged with or interested in digital currency, to understand what this announcement does and does not signify. Although the Treasury did say it was considering “plans for a digital pound” and that such a currency was “likely to be needed in the future”, the department also said that no decision had been made “at this stage” on whether to actually introduce a digital currency.
The news release also stated that the Bank of England “will now take forward further research and development work and the public are being invited to give their views on the scheme to be taken forward.”
The Treasury said that it was initiating the consultation because both it and the Bank wished to ensure the public had access to convenient-to-use and safe money, amid the continuing ever-greater digitalisation of people’s day-to-day lives. It cited as another priority an ambition to support “private-sector innovation, choice and efficiency in digital payments.”
As for the timeframe for the CBDC’s debut, the department stated that a decision on whether to implement a digital pound would only be made “around the middle of the decade”. It added that the second half of the 2020s would be “the earliest stage at which the digital pound could be launched.”
So, how would a ‘digital pound’ actually work?
One might have imagined that with such a relatively long timeframe set out – and the Treasury stating that a digital pound would largely draw upon “future developments in money and payments” – there wouldn’t necessarily be much detail forthcoming at this stage.
Actually, though, the Treasury did set out a fair amount of information. This included that the digital currency would be issued by the Bank of England, with the idea being that it would “replicate the role of cash in a digital world, so that it is risk-free, highly trusted, and accessible”.
Further explained in the department’s statement was that – despite the “Britcoin” name that had previously been applied by some observers to the idea of such a digital currency – a digital pound would not be a cryptocurrency. It would be interchangeable with cash and bank deposits, complementing cash, and £10 of a digital pound would always be the same value as £10 of cash.
To put it in the Treasury’s words, “unlike cryptoassets and stablecoins, the digital pound would be issued by the Bank of England and not the private sector.”
It would be the Bank that would provide the ‘core ledger’ for the digital pound, while digital wallets – offered to consumers by the private sector – would enable people to seamlessly manage their balance and make payments.
You can click through to the GOV.UK website to read more about what has been proposed for a ‘digital pound’ in the UK, which we are sure will continue to make for interesting reading as the UK Government progresses its plans.
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