Emma RadmoreTreasury and BoE are consulting on the potential creation of a digital pound, which would be issued by the BoE. It would be interchangeable with cash and could be used for in-store and online payments.
No formal decision has been made to introduce the digital pound, or CBDC, but the regulators think it is likely to be needed in future, and are using the consultation to help BoE as it takes forward further research.
Initial thinking includes:
- that the digital currency would not replace cash, and would always be valued on a par with it;
- BoE would be the issuer, meaning it would have intrinsic value and not be volatile. BoE would use a core ledger to provide the minimum necessary functionality which would then enable regulated private firms to use the infrastructure to design innovative, user-friendly services and handle all customer-facing interactions;
- holders would have the same levels of privacy as a bank account. It would not be anonymous, but would be inclusive and allow users to be in control of their data. There is no intention to program the digital pound or restrict how it can be spent;
- consumers could access the currency through digital wallets on smartphones or smartcards, broadly using the same infrastructure as for contactless payments;
- the currency would be used for payments rather than savings
- there would, at least initially, be limited on how much any individual or business could hold, not least to discourage the potential for large outflows from banking deposits into digital pounds.
Consultation closes on 7 June 2023.
There will be a decision on whether to implement a digital pound will be taken “around the middle of the decade” with any digital pound not being launched no earlier than “the second half of the decade”.