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Welcome to the future of the UK Economy - How it will change your personal life and your business

Welcome to the future of the UK Economy - How it will change your personal life and your business

Mike Wakeford

A new consultation has been published jointly by HM Treasury and the Bank of England to consider the launch of a potential digital pound, or central bank digital currency (CBDC). The possible new digital pound has also been referred to as ‘digital sterling’ and ‘Britcoin

The digital pound would be a new type of money issued by the Bank of England for individuals and businesses to use for day-to-day spending in-store or online and to make payments. The digital pound would be denominated in sterling and its value would be stable, just like banknotes. £10 in digital pounds would always have the same value as a £10 banknote.

If introduced a digital pound would be interchangeable with cash and bank deposits, complementing (not replacing) cash. The Bank of England has committed to continue to issue cash for as long as people want to keep using it.

What would a digital pound look like?
The digital pound would not be a cryptocurrency or crypto asset. As opposed to cryptocurrencies, which are issued privately, the digital pound would be issued by the Bank of England and be backed by the Government.
  • It would replicate the role of cash in a digital world, so that it is risk-free, highly trusted and accessible
  • £10 of a digital pound would always be worth the same as £10 of cash
  • Issued by the Bank of England, widely available and convenient to use
  • Subject to rigorous standards of privacy and data protection - neither Government nor the Bank would have access to personal data and holders would have the same level of privacy as a bank account
  • Accessed through digital wallets offered to consumers by the private sector through smartphones or smartcards
  • Intended for payments, online, in-store, and to friends and family, rather than savings, with no interest paid on holdings
  • Initial restrictions on how much an individual or businesses could hold
Whilst no decision has yet been made, other countries around the world are considering similar proposals including the Eurozone and the US and China.

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.

A decision about whether to implement a digital pound will be taken around the middle of the decade and will largely be based on future developments in money and payments. The earliest stage at which the digital pound could be launched would be the second half of the decade.

How might a digital pound work?

     Platform model
The Bank would provide the central public infrastructure in the form of a ‘core ledger’ – a fast, resilient, secure technology platform – which would provide the minimum necessary functionality. Regulated private firms could then use this infrastructure to design innovative, user-friendly services and handle all customer-facing interactions.

     Data protection and privacy
A digital pound would be subject to rigorous standards of privacy and data protection. Like current digital payments and bank accounts, the digital pound would not be anonymous because the ability to identify and verify users is necessary to prevent financial crime. This is essential for trust and confidence in money and therefore wide use of the digital pound. The intention is to create a digital pound that is inclusive and allows users to be in control of their data. This will be considered in the design of the digital pound. Neither the Government nor Bank would program a digital pound or restrict how it was spent.

     User experience
Digital wallets could allow people to seamlessly manage their balance and make payments. Wallets would be used in the same way as current contactless payments and use the same merchant infrastructure. Payments would be speedy and confirmed immediately. A digital pound may also bring benefits by adding to already existing payments options, support financial inclusion and improve cross-border payments which can be expensive, slow and opaque.

     Holding limit
A limit on individuals’ holdings would apply at least in the introductory phase. This would strike a balance between both encouraging use and managing risks, such as the potential for large and rapid outflows from banking deposits into digital pounds. These limits could be amended in the future.