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The United Kingdom (U.K.) has stepped up its efforts to introduce a central bank digital currency (CBDC). The Bank of England (BoE) issued a consultation paper along with the H.M. Treasury outlining the various aspects of the digital pound.
On Tuesday, the BoE and H.M. Treasury released a consultation paper in which it announced the launch of its digital pound CBDC project. The digital pound has been planned for some time but has finally come to fruition. The document outlines that the project will be backed and issued by the BoE and describes the digital pound as a “new form of digital money for use by households and businesses.”
The digital pound would be a new form of sterling, similar to a digital banknote, issued by the Bank of England. It would be used by households and businesses for their everyday payments needs. It would be used in-store, online and to make payments to family and friends. If introduced, it would exist alongside, and be easily exchangeable with, cash and bank deposits.
Digital Pound is Still in the Planning Phase
While the issuance of the consultation paper is the next step in making the CBDC a reality, it is critical to note that the project is still in its planning phase. According to reports, the BoE and H.M. Treasury outline that the digital pound aims to operate in conjunction with cash – not replace it, a digital currency counterpart to the traditional financial system. Ultimately, the BoE wants to use the CBDC to “ensure that central bank money remains available and useful in an ever more digital economy.”
Interestingly, the BoE suggests limiting the amount of digital pounds citizens should hold.
We judge that a limit of between £10,000 and £20,000 per individual is likely to strike an appropriate balance between hanging risks and supporting wide usability of the digital pound.
Formally Introducing a CBDC May Be Years Away
The BoE is firm on its stance that it is still too soon to decide whether to introduce a digital currency. While the digital pound project has been launched, the decision to formally issue a CBDC may still be years away. Speaking of the benefits of introducing a CBDC, the BoE notes that “private sector innovation” may be one of the benefits of introducing a more diverse payments network. The central bank notes that the decision of whether digital payments may become necessary in the U.K. would only be made by observing “how the payments landscape evolves in coming years, both in the U.K. and abroad.”
The BoE and H.M. Treasury have made the consultation paper open to responses until June 7, 2023.
The U.K. Seeks to Become a Global Crypto Hub
The arrival of newly elected pro-crypto Prime Minister, Rishi Sunak, has had the world waiting in anticipation of the U.K.’s next step in welcoming crypto to its shores. PM Sunak wants to make the country the go-to hub for crypto worldwide, but his government has taken a somewhat slow approach to achieving this goal. In a bid to inform the world of its arrival to the crypto stage, it was recently announced the country wants to develop and its own crypto – dubbed “Britcoin,” by the British media.
U.K.-based National News quoted Professor Nicholas Ryder from Cardiff University,
The consultation has certainly been a long time coming and it represents several years of planning by the government. The plan is to make the UK the epicentre of the global cryptoasset market.
However, the government must draw a very fine balancing act between encouraging financial innovation and tackling the threat presented by financial crime.
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