The Bank of England and HM Treasury are consulting on a potential digital pound, or central bank digital currency (CBDC), that could be used by individuals and businesses for everyday payments.
“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,” Chancellor of the Exchequer Jeremy Hunt said in a news release.
Unlike cryptoassets and stablecoins, the digital pound would be issued by the Bank of England and not the private sector, the news release said. This means that it will have intrinsic value and not be volatile, unlike unbacked cryptoassets, as there would be a central authority to back it.
The digital pound would, according to the release:
- Replicate the role of cash and be worth the same amount of money as the cash equivalent.
- Be subject to rigorous standards of privacy and data protection.
- Be accessed through digital wallets offered to consumers by the private sector through smartphones or smartcards.
- Be intended for payments — online, in-store, and to others — rather than savings, with no interest paid on holdings.
- Have initial restrictions on how much an individual or business could hold.
Countries around the world are considering similar proposals, including the euro zone, the US, and China, the news release said. The earliest the digital pound could be launched would be the second half of the decade.
“As the world around us and the way we pay for things becomes more digitalised, the case for a digital pound in the future continues to grow. A digital pound would provide a new way to pay, help businesses, maintain trust in money, and better protect financial stability,” Governor of the Bank of England Andrew Bailey said in the release.
The consultation is open until 7 June. Comments can be submitted online or to digitalpoundconsultation2023@bankofengland.co.uk.
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