Next week, the Bank of England and the UK Treasury are set to lay out a roadmap for introducing a digital pound as the new central bank currency by 2030, amid expectations that a new form of money will need to be integrated into Britain’s banking system.
The Telegraph newspaper expected that Bank of England Governor Andrew Bailey and Chancellor of the Exchequer Jeremy Hunt would talk about the potential need for a new form of money as cash use continues to decline in an increasingly digital economy.
It is noteworthy that the new state-backed digital currency, called “Britcoin”, will be used alongside traditional cash currencies in light of fears that physical cash currencies will be phased out until they completely disappear from the banking scene.
The “Britcoin” project dates back to 2021 when Prime Minister Rishi Sunak, when he was Treasury Secretary in the Johnson government, formed a working group to explore whether or not to create a so-called central bank digital currency (CBDC).
The United Kingdom’s central bank (Bank of England) digital currency is intended to use the “blockchain” technology currently used by cryptocurrencies to record transfers on a central digital ledger.
The Bank of England (the central bank of the United Kingdom) creates money digitally by issuing new reserves in commercial banks, but a bank’s digital currency would theoretically allow the bank to issue new digital currency directly to individuals or businesses.
Bitcoin on smartphones
A central bank digital currency (CBDC) will also allow people to hold digital currency on devices such as smartphones without the need for a bank account, similar to the way physical cash can be kept in a wallet, issued by the Bank of England in the same way banknotes are issued. The bank and the Treasury will be given the opportunity to consult for four months, in which they will invite businesses, academics and the public at large to share their views on the launch of the new digital pound.
Meanwhile, the new digital currency raises concerns about the possibility of phasing out traditional cash, although the British government issued legislation last year to protect cash, stressing that “any digital currency will remain alongside cash and not a substitute for it, as is rumored.”
The first digital fairy test in 2025
Expectations indicate that the Bank of England and the Treasury will begin the stage of designing the digital pound, and this may take several years, and officials have identified the year 2025 as the closest to starting testing a prototype for the currency.
Earlier, the Bank of England said that the earliest date for launching central bank currencies in the United Kingdom was the second half of the current decade.
British MP Andrew Griffiths told the Treasury Select Committee earlier this month that “there are some really important public policy issues around how we go about designing a sovereign digital currency,” adding, “We have to get it right without wheel”.