A state-backed “digital pound” could be launched later this decade, with the Bank of England and the Treasury laying out a roadmap for the potential introduction of a new central bank currency.
The bank and the government will officially begin consultations on the digital currency on Tuesday.
The authorities said the digital pound to be issued by the Bank of England “is likely to be needed in the future” as the use of cash and cards continues to change.
However, the process of consultation and research does not mean that a central bank digital currency (CBDC) will necessarily be issued, but a decision must be made at a later stage.
While cash isn’t going anywhere, the digital pound sterling issued and backed by the Bank of England could be the new secure, affordable and easy-to-use payment method.
This comes after years of speculation that the currency could be considered amid the rapid rise of new digital financial formats such as cryptocurrencies and stablecoins.
The Treasury emphasized that the potential currency is not a crypto asset, but a private investment.
Prime Minister Rishi Sunak asked the Bank of England to look into the bank-backed currency case in 2021 when he was Chancellor.
In October, Mr Sunak’s Treasury Secretary Andrew Griffith warned that a long delay in issuing the digital pound could create problems for the economy.
The current chancellor, Jeremy Hunt, said: “While cash is here to stay, the digital pound issued and backed by the Bank of England could be the new secure, affordable and easy-to-use payment method.
“That’s why we want to figure out what’s possible first, always making sure we protect financial stability.”
The Bank of England will conduct further research and development while the public is invited to participate in the consultation process.
The bank and the Treasury said the currency would not fundamentally change how the British use money, but they believe it could help “ensure the public has access to safe money that is convenient to use as our daily lives become more digital”.
The consultations will last about four months. It is clear that the design phase is likely to last until at least 2025, after which a final decision could be made.
If he gets the go-ahead, significant investment will be required to launch the currency, which could happen in the second half of this decade.
This consultation, and the further work that the Bank will now undertake, will form the basis of what will be an important decision for the country about how we use money.
The currency would be issued and held by the Bank of England, but intermediaries such as consumer banks or other businesses would be required for people to spend it.
There will likely be initial limits on how much currency any individual or entity can hold.
Andrew Bailey, Governor of the Bank of England, said: “As the world around us and how we pay for things becomes more digital, the case for a digital pound in the future continues to grow.
“The digital pound will provide a new way to pay, help businesses, maintain confidence in money, and better protect financial stability.
“However, there are a number of implications that need to be carefully considered in our technical work.
“This consultation, and the further work that the Bank will now undertake, will form the basis of what will be an important decision for the country on how we use the money.”
Countries around the world are also considering similar proposals such as the US, China and the Eurozone.
Tulip Siddiq, Labor shadow minister, said: “We fully support the Bank of England’s work to explore the potential benefits of a safe and stable CBDC.
“This is a welcome contrast to the conservative government’s advancement of the crypto-wild west, which has put millions of people’s savings at risk.”
Credit: www.independent.co.uk /