Home 2023 UK’s digital pound would modernize payments but won’t replace cash

UK’s digital pound would modernize payments but won’t replace cash

Finance Minister Jeremy Hunt has stated that the digital pound, or “Britcoin,” created and backed by the Bank of England, won’t negate the necessity for cash.

Planning is underway to develop a digital currency that may “offer a new way to pay” without necessarily replacing cash, according to the Bank of England (BoE) and the UK Treasury.

Forming a CBDC

The BoE and Treasury released a joint consultation document on central bank digital currencies (CBDCs) on February 7 in order to solicit input on how and whether they should move forward with creating a CBDC.

Finance Minister Jeremy Hunt stated in a public statement on February 6 that the two organizations will work to create a modernized digital payments system that doesn’t necessarily eliminate the usage of cash.

“While cash is here to stay, a digital pound issued and backed by the Bank of England could be a new way to pay that’s trusted, accessible and easy to use,” he said, adding that “we want to investigate what is possible first, whilst always making sure we protect financial stability.”

Providing a publicly supported alternative to privately issued stablecoins will be a major area of effort, meanwhile officials from the BoE and Treasury anticipate that Big Tech companies will build one in the years to come.

BOE Governor Andrew Bailey stressed that a “digital pound would provide a new way to pay, support businesses, retain trust in money, and better protect financial stability” as part of the statement.

“However, there are a number of implications which our technical work will need to carefully consider. This consultation and the further work the bank will now do will be the foundation for what would be a profound decision for the country on the way we use money.”

On February 7, BoE Deputy Governor Jon Cunliffe will deliver a speech to the financial sector to update them on the CBDC work that the central bank and the Treasury have done so far.

If they decide to proceed, they plan to construct the digital pound and the technology that underpins it at earliest in 2025 despite mountng pressure.

PM’s thoughts

Former finance minister and current prime minister Rishi Sunak instructed the BoE and Treasury to work together to establish the Central Bank Digital Currency Taskforce in April 2021. The pair’s main responsibility is to supervise the investigation into and potential rollout of the digital pound.

Given the BoE and Treasury’s caution, it seems like progress has been slow to date, although on January 24, the latter did submit a job description to LinkedIn seeking a team leader for its Payments and Fintech Team of about 20 people looking into a “possible digital pound.”

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