On February 7th, the Treasury and the Bank of England launched a consultation into the feasibility of a digital currency for the UK. Under the plans being scoped out, the digital currency could launch within ten years and be interchangeable with cash.
Less Cash Being Used
Unlike cryptocurrency, the digital pound would be issued by the central bank. It would be interchangeable with cash for payments in-store and online. The use of cash has already been falling in the UK. It is expected that by 2031, cash will account for less than six per cent of all payments made.
Crypto Unregulated
There is currently a divide between centrally issued currencies and the crypto variety. Fans of crypto love the fact that it is not centrally regulated. However, this can make for a risky investment, and many people have lost fortunes speculating on crypto coins. Most of us already use digital money; all our online transactions happen in a digital format, as do contactless payments. The difference is we could, in theory, walk into a bank and withdraw all our money in cash if we chose to.
A Changing World
The idea of a digital pound looks likely to become a reality. The consultation starts from the position that a digital currency will be a likelihood in the future. However, the Treasury stressed that no decision had been taken at this stage. This consultation is separate from the plans it has to protect access to cash. But, undoubtedly, it is a sure-fire indication of a changing world.
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Already Digital
At present, digital currency is accepted by certain websites and operators. PayPal is one good example, as it accepts crypto at checkout in select countries. Other online platforms, like casinos you can find at online-slot.co.uk, for example, already offer customers a wide range of payment options. In addition, there are all kinds of fintech solutions, including cryptocurrency options and digital prepayment products. So it is expected that from the customer’s point of view, using a digital pound will not be very different from the current experience.
Timeframes
The decision about whether to go ahead or not will be taken within the next five years. The Government said it would be based on future developments in payments and money. The earliest the currency could be launched is the decade’s second half.
Statements from the Treasury and Bank of England
The public is being invited to share their views on the scheme, and the consultation is open until June 7th 2023. The Treasury states it plans to ensure the public can access money in the digital world in a way that keeps them safe.
Jeremey Hunt said: “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 is trusted, accessible and easy to use.”
The Governor of the Bank of England, Andrew Bailey, added: “As the world around us and the way we pay for things become more digitalised, the case for a digital pound continues to grow. A digital pound would provide a new way to pay, help businesses, maintain trust in money and protect financial stability.”
Replicate Cash
The plans, as currently outlined, would see the digital pound replicate the role of cash. With crypto, there is always a speculative element; this would not be the case for the digital pound. £10 worth of digital would be the same worth as £10 of cash. The Bank of England would issue the currency. Many people have privacy concerns, but it has been stressed that neither the Government nor the bank could access personal data. Privacy levels would be the same as for a bank account.
Public/ Private Initiative
Unlike crypto assets and stablecoins, the digital pound would be issued by the central banking system, not the private sector. The Government says this means it will have intrinsic value and not be volatile like unbacked cryptocurrencies. The plan is for the Bank to provide central public infrastructure and for regulated private firms to design user-friendly services and customer-facing interactions.
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