Bank of England and UK Treasury propose government-backed digital pound that could supplant cash by end of decade
The UK Treasury and Bank of England are laying the foundations for a possible “digital pound” designed for the age of cryptocurrencies.
The concept would be intended to encourage financial innovation while ensuring the Bank of England retains control over the country’s core financial infrastructure.
A UK central bank digital currency (CBDC) would present few immediate differences to consumers’ existing systems for fast digital payments, officials acknowledged.
But they said a digital pound could prevent any private company from taking the lead and enclosing such a cryptocurrency within a closed network.
‘Trusted and accessible’
Chancellor Jeremy Hunt said the currency could be a new “trusted and accessible” way to pay.
But he said the tovernment would take a gradual approach, with any project unlikely to be launched before 2025 at the earliest.
“We want to investigate what is possible first, whilst always making sure we protect financial stability,” Hunt said.
The Treasury and the Bank of England are to begin a formal consultation on the proposal on Tuesday.
If the project were greenlit the government would invest in building out an official digital payments infrastructure.
In order to guard against potential instability from households and organisations immediately withdrawing large amounts of funds from commercial banks to put them into a government-backed digital pound, there would be initial limits on how much could be held in the new digital wallets.
Officials are seeking to ensure the possible digital currency would play a similar role to cash, allowing seamless payments and not receiving any interest.
Neither the Bank of England nor the Treasury would have access to data on transactions, but customers could choose to cede some privacy rights to private wallet providers in exchange for discounts or other benefits.
Other countries and blocs, such as the Eurozone, the United States and China, are investigating official digital currencies, in some cases with an eye on the currencies being used for international transactions.