Britain’s journey towards the possible introduction of a digital pound, colloquially called ‘Britcoin’, has entered a new phase. The Bank of England (BoE) and HM Treasury published their response to the digital pound consultation on 25 January 2024, which marked a cautious but progressive approach towards exploring a Central bank digital currency (CBDC) in Great Britain.
This development follows a consultation launched in February 2023, which sought input from the public and industry. More than 50,000 responses were received, highlighting concerns about user privacy, control of funds and access to cash.
Privacy and legislation
A key outcome of the consultation is the commitment to user privacy. The BoE and HM Treasury have assured that neither institution would have access to users’ personal data in the proposed digital pound system. Primary legislation would guarantee user privacy and control and guarantee transparency and public trust.
Maintain access to cash
At the same time, the commitment to maintain access to physical cash has been reaffirmed. Authorities recognize the continued relevance of cash, especially for parts of the population that depend on it. The Financial Conduct Authority (FCA) will also publish a new regulatory framework by summer 2024 to protect access to cash.
Design and features
The digital pound should complement cash and provide an alternative to digital transactions. It would be equivalent in value to physical currency, accessible through digital wallets, and initially introduced with holding limits. Notably, it would offer no interest, which sets it apart from traditional savings accounts.
Skepticism and future steps
Despite these assurances, skepticism remains. Concerns about privacy and the potential impact on financial stability persist, especially regarding bank runs during crises. The Treasury Committee and several industry stakeholders have called for more detailed plans and clearer timelines.
The next steps include further research and design considerations. After this, a decision will be made whether or not to continue with the digital pound. If positive, a timeline for additional consultations and a possible launch will be established, but this is not expected before 2025.
The UK’s exploration of a digital pound comes amid a global shift to digital currencies. Countries around the world are evaluating CBDCs, each with unique approaches to privacy, access and integration with existing financial systems.
Conclusion
Britain’s cautious but forward-looking approach to a potential digital pound reflects the complexity of introducing a CBDC. Balancing innovation with privacy, security and traditional banking practices remains a challenging but essential undertaking.
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