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UK to launch “digital pound” after reviewing CBDCs

By Puja Sharma

February 07, 2023

  • Bank of England
  • Blockchain
  • CBDC
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blockchain, CBDC, bank of England

According to a statement, the two institutions say a CBDC would be “subject to rigorous standards of privacy and data protection” and that neither Government nor the BoE would have access to personal data with holders having the same level of privacy as a bank account.

As announced by HM Treasury and the Bank of England, digital wallets will be able to store the digital pound issued by the Bank of England in the future.

In the age of blockchains, central bank digital currencies (CBDCs), often seen as state versions of cryptocurrency, are expected to become a necessary method for governments to issue for households and businesses to use for everyday payments. According to the Bank of England, it is continuing to research and develop a digital currency, although a decision has not yet been made regarding its introduction.

A consultation is being launched, with the UK public “invited to give their views” on the scheme. According to the BoE and HM Treasury, they want people to have access to safe, convenient, and efficient payment systems as our daily lives become more digital.

“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. That’s why we want to investigate what is possible first, whilst always making sure we protect financial stability,” Chancellor of the Exchequer Jeremy Hunt said.

According to a press statement, the two institutions say a CBDC would be “subject to rigorous standards of privacy and data protection” and that neither Government nor the BoE would have access to personal data with holders having the same level of privacy as a bank account.

CBDCs are being explored in many major nations and groups including the US, China, and the Eurozone. Unlike crypto assets such as Bitcoin and stablecoins, they are issued by central banks which, according to adherents takes away the volatility issue associated with cryptocurrencies.

“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,” said Andrew Bailey, governor of the Bank of England.

“However, there are several implications that our 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,” Bailey said.

However, many commentators say it will bring other issues, particularly if it comes at the expense of the provision of cash services.  Other concerns are around privacy with any digital pound not being anonymous.

“The needs of vulnerable people are being considered in the digital pound design process ensuring that it would be simple and straightforward to use and understood and trusted by the public as a form of money,” according to the statement.

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