The Bank of England and the UK Treasury are starting their journey towards creating a digital currency that could change the way the British pay, but still, keep cash in use. A joint consultation paper on central bank digital currencies (CBDCs) is set to be published on 7th February, seeking feedback on how and if they should proceed with building a CBDC.
Finance Minister Jeremy Hunt stated that the two organizations are looking to develop a modernized digital payment system that doesn’t eliminate the use of cash. The primary objective is to provide a government-backed alternative to privately issued stablecoins, with BoE and Treasury officials expecting Big Tech companies to develop them in the coming years.
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.
Finance Minister Jeremy Hunt.
BoE Governor, Andrew Bailey, emphasized that a digital pound would provide a new way to pay, help businesses, maintain trust in money, and better protect financial stability. However, he added that there are a number of implications that their technical work will need to carefully consider. This consultation and the further work the bank will now do will be the foundation for what would be a profound decision for the country on the way we use money.
The digital pound and its underlying blockchain-based system will not be built until at least 2025, if the BoE and Treasury decide to move forward with the project. In April 2021, now Prime Minister Rishi Sunak directed the BoE and Treasury to form the Central Bank Digital Currency Taskforce to oversee the study and potential implementation of the digital pound.
BoE Deputy Governor, Jon Cunliffe, is also expected to give a speech on 7th February to update the finance industry on the central bank and Treasury’s CBDC work so far. The Treasury posted a job listing on LinkedIn on 24th January calling for a team lead for its Payments and Fintech Team of roughly 20 people focused on exploring a “potential digital pound.”
In conclusion, the UK government is taking the first steps towards creating a digital pound that could provide a new way to pay and protect financial stability. The consultation paper will provide a foundation for what could be a profound decision for the country on the way we use money. The BoE and Treasury are cautious with their approach, but the job listing posted on LinkedIn suggests that they are serious about exploring the potential of a digital pound.