• The Bank of England and the HM Treasury department have released a consultation paper on the „digital pound,“ a UK central bank digital currency.
• The digital pound would be subject to rigorous privacy and data protection standards, allowing users to make choices about their data.
• It is too early to decide on launching the digital pound but it is likely that one will be needed in the future as it would be used by households and businesses for everyday payment needs.
Bank of England Releases Paper on Digital Pound CBDC
The Bank of England (BOE) and the HM Treasury department have published a consultation paper on the “Digital Pound,” a UK central bank digital currency (CBDC). It stated that the CBDC would be subject to rigorous privacy and data protection standards, allowing users to make choices about their data. While it is too early to decide on launching the digital pound, it is likely that one will be needed in the future.
Purpose of Digital Pound
The retail CBDC would be used by households and businesses for everyday payment needs such as stores, online shopping, and transfers between parties. Furthermore, it would exist alongside cash and bank deposits making it interchangeable with them both. Accessible through smartphones, this suggests that BOE are also developing a dedicated digital wallet for it.
Competition With Cash Payments
The BOE acknowledged that cash payments were still widely accepted in Britain and had many benefits but noted they did not offer all features necessary for modern payments such as speed or security against fraud or cyberattacks. Therefore they concluded that there was an opening for something like a CBDC which could fill these gaps while still providing strong consumer safeguards.
Future Plans For Digital Pound
The consultation paper seeks views from stakeholders regarding potential design features of a digital pound such as applications in different sectors or its use in international payments systems. It also touched upon how best to protect user’s rights over their personal information when using a CBDC alongside other policy considerations such as competition regulation or taxation issues associated with its use.
By releasing this consultation paper, BOE has taken another step towards potentially introducing a UK central bank digital currency in coming years although much more research needs to take place before any decisions can be made about its launch date or technical specifications