The United Kingdom is set to embark on a new era of payment modernization with the introduction of a digital pound. The Bank of England and the UK Treasury are about to launch a joint consultation paper on central bank digital currencies (CBDCs) and are seeking feedback on the possibility of introducing a digital currency.
Cash will still dominate the UK
Finance Minister Jeremy Hunt indicated that the introduction of a digital pound, issued and backed by the Bank of England, could be a new way to pay that is trusted, accessible, and easy to use.
He emphasized that while cash will still be in control, a digital pound could be a new means of payment that could help businesses and maintain trust in money while protecting financial stability.
BOE Governor Andrew Bailey also emphasized that a digital pound would provide a new way to pay, help businesses, maintain trust in money, and better protect financial stability.
The move is part of the UK’s focus on the cryptocurrency sector and Prime Minister Rishi Sunak’s support for the digital currency sector.
Another key area of focus for the Bank of England and the Treasury is to provide a government-backed alternative to privately-issued stablecoins.
Officials from the Bank of England and Treasury are expecting big tech companies to develop such coins in the coming years.
In April 2021, Prime Minister Rishi Sunak directed the Bank of England and the Treasury to collaborate and form the Central Bank Digital Currency Taskforce to study and implement a digital pound.
The Bank of England and Treasury are cautious in their approach and have not yet made a decision to launch a central bank digital currency.
Governments and central banks across the world are working together to explore the possibility of having a digital currency. The focus is on issues such as energy efficiency, availability, and the safety and security of the user’s money.
G7 countries are not that into digital asset solutions
Each nation is responsible for determining whether or not it would issue its own form of digital currency via a central bank, and none of the G7 countries have yet taken that decision.
In the UK, a new joint task force between the Treasury and the Bank of England has been established to look into a potential CBDC as a complement to cash-in bank deposits.
The report will help support and inform the exploration of CBDCs in the G7 and beyond, covering a range of important matters such as financial stability, cyber resilience, energy efficiency, privacy, inclusion, and tackling illicit finance.
It is possible that the introduction of a digital pound in the UK will signal the beginning of a new era in the renovation of payment methods, which will provide companies and customers with additional payment options in the future.
The Bank of England and the Treasury are taking a cautious approach, but it is worthwhile to investigate further the possible advantages of switching to a digital version of the pound.
