Bank of England and HM Treasury outline case for digital pound
The Bank of England and HM Treasury have released a consultation paper setting out the case for a retail central bank digital currency (CBDC).
Outlining the case for a digital pound, Chancellor Jeremy Hunt says it is likely one will be needed in the future and that it would offer benefits, even if it is too early to commit to building the infrastructure needed.
Nonetheless, the Bank of England and HM Treasury plan to “accelerate” work on the technology and policy architecture for a digital pound.
“Any future digital pound would be a major piece of national infrastructure which would likely take several years to complete,” Hunt says, and its launch would require “deep public trust” in this new form of money.
The digital pound would be a new form of sterling, similar to a digital banknote, and would be used by households and businesses for their everyday payments needs, whether in-store, online and to make payments to family and friends.
Importantly, it would be exchangeable with cash and bank deposits and promote “innovation, choice and efficiency” in domestic payments.
The consultation paper has been put together by the joint BoE-HM Treasury CBDC Taskforce set up in April 2021 and is seeking feedback from businesses and the wider public until 7 June 2023.
The necessity of a digital pound hinges significantly on how the payments landscape evolves in the coming years, both in the UK and abroad. In particular, privately issued digital money and how they interact with existing forms of money and payments.
The paper notes that other countries are already working on CBDCs and their potential to affect the UK domestically and its international position as “a global leader in finance” must also be considered.