The Treasury and the Bank of England have announced that a state-backed digital pound is likely to be launched later this decade. The proposed central-bank digital currency (CBDC) aims to ensure public access to safe, easy-to-use money in the digital age.
Chancellor Jeremy Hunt stated that the digital pound could become a new 'trusted and accessible' payment method. A formal consultation on the currency will begin on Tuesday, with the goal of investigating possibilities while maintaining financial stability.
Unlike cryptocurrencies such as Bitcoin, the digital pound would be issued by the Bank of England and would be less volatile. Ten digital pounds would always be worth the same as £10 in cash, according to the Treasury. The move follows a request from Prime Minister Rishi Sunak in 2021, when he was chancellor, for the Bank of England to explore backing a digital currency.
The consultation will address privacy and data protection concerns. Neither the Bank of England nor the government would have access to transaction data. Consumers could choose providers, including non-banks, to hold their cash in digital wallets with varying privacy levels. Initial restrictions on how much individuals or businesses could hold are expected.
Bank of England Governor Andrew Bailey emphasised that the digital pound would provide a new payment method, help businesses, maintain trust in money, and better protect financial stability. He described the consultation as the foundation for a profound decision on the future of money.
The UK is not alone in exploring digital currencies; similar proposals are being considered in the US, China, and the Eurozone. The primary aim is to maintain UK monetary sovereignty against potential upheaval from big tech companies that might create fragmented, unregulated digital currencies.
