Digital Pound: UK Speeds Up Work On CBDC Recommendations

The present conversations and plans revolving around CBDCs gained momentum in 2019 following a proposal by Facebook to have a crypto-asset called Libra.

The United Kingdom is speeding up its work on having a possible digital pound soon in the near future. This is being done with the aim to make it publicly used digital currency in the second half of this decade. It is expected to ensure the prevention of fragmentation of an electronic cash infrastructure that hugely depends on tech and banking giants across the nation. The Bank of England (BoE) and the country's finance ministry have stated that a digital currency under the control of the central bank could soon be required during this decade itself. Top government officials have already started a fresh consultation about the design of such a system for the digital pound.

Britain's Finance Minister Jeremy 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's trusted, accessible, and easy to use."

He also added that there is a need to investigate any such possibilities in the near future. Hunt also said "we should always make sure we protect financial stability," reported Reuters.

BoE Governor Andrew Bailey believes that everything pertaining to a digital pound should be given adequate attention. This included privacy matters as well. Commenting on the matter, he said, "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."

UK Prime Minister Rishi Sunak had asked BoE to focus on the idea of a CBDC and do a proper study on the matter. Sunak did this while serving as Britain's finance minister in 2021.

Meanwhile, other central banks, including the US Federal Reserve and the European Central Bank, have also been planning to introduce their own CBDCs in the coming years. The report also noted that about eleven countries have already launched their digital currencies.

The digital pound will be issued by the central bank authorities and not by any private player in the market. Even the value of any such digital currencies will be fixed, reported Reuters.

The current set of proposals by Britain says that no individual will be allowed to hold accounts directly with BoE. However, these individuals can have accounts associated with private digital wallet providers, which will ensure digital pounds rather than public infrastructure.

Top bank officials said that the digital pound would ensure no risk of competing and that all the systems are non-interoperable.

The present conversations and plans revolving around CBDCs gained momentum in 2019 following a proposal by Facebook to have a crypto-asset called Libra. The idea behind Libra was that it would have its value associated with other currencies. However, it could not continue for long.

Earlier, the current head of innovation at the Bank of International Settlements claimed that CBDCs will face geopolitical restrictions across the globe, as an increasing number of countries are planning to launch their own digital currencies. For instance, China has already started conducting tests related to the largest cross-border CBDC.

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