The Bank of England & digital Pound
Britain is insistent with work on a possible digital pound which in the second half of the decade could be in use, which in turn can help to prevent the decentralization of an electronic cash system, that is dominated- by banking and tech giants, said officials on Monday.
The finance ministry and The Bank of England (BoE) said a central bank digital currency (CBDC) will mostly be needed later in the decade as a new dialogue and a new design for such a system will be launched.
“Although Cash is here to stay, a digital pound- which is backed by the Bank of England (BoE) could be a new way to pay as it is trusted, easy to use and accessible,” Jeremy Hunt, finance minister said in a statement.
Circulation from Governor of Bank of England
“That’s why we want to inspect what is possible first, however at all times ensuring we safeguard financial stability.”
Governor of BoE Andrew Bailey stated the consequences of a digital pound- comprising privacy issues- had to be taken into consideration.
“The consultation and any work done by the BoE from now will be the foundation for what would be an abstract decision for the country on how we use money,” he said.
When Prime Minister Rishi Sunak was the finance minister in 2021, he asked the BoE to dig into the case for a CBDC.
11 Countries have already inaugurated their own CBDCs, Other central banks, like the European Central Bank and the U.S. Federal Reserve, are also evaluating inaugurating their own CBDCs.
A joint consultation was published by the Bank of England and HM Treasury.
The consultation paper demonstrated analysis by the Bank of England and HM Treasury on the Probable case for a central bank currency in the UK- a “digital pound” and confer on the key features of a probable model.
For everyday payment needs, be it businesses or households, a digital pound would act as a new form of digital money. As part of the wider scope of money, it would stay alongside cash and not replace it, a digital parallel to friendly, trusted coins and banknotes, subject to meticulous standards, of data protection and privacy.
This is in line with our aspiration that the public’s trust in money stays high and that developed forms of payments and money meet the ever-changing needs of businesses and individuals.
However, it is too soon to commit to constructing the infrastructure for a digital pound, the Government and the Bank of England are sure that more preparatory work is valid to properly acknowledge the unfolding of international developments, new technologies, and fresh opportunities.
Officials at the Bank of England and my department in the consultation period of 4 months will engage vastly around the UK to pursue views on a probable digital pound. Responses to the consultation are, requested from all interested members of the public, the widest range of establishments, and experts.
This consultation is an important step to place the UK to act conclusively by launching a digital pound if we choose to do so.
Denominated in sterling, the digital pound’s value is expected to be stable, just like banknotes. A £10 banknote would have the same value as £10 digital pound and vice versa.
A set of choices for the use of the digital pound are mentioned below.
How it might work?
-One day in the life of a digital pound user
Checking the balance on the digital pound wallet.
Buying a cup of coffee using your smartphone with digital pounds – with just a tap on the same device used for credit and debit cards, the payments can be made.
Paying the plumber in digital pounds – both of you can get a notification that the payment is completed that too instantly.
Online grocery shopping, and paying for it using the digital pound option on the website’s checkout.
From your bank account, transfer money into your digital pound wallet.
A digital pound is necessary to fulfill our mission
Digital payments are becoming more of a trend and people are not using cash for payments as much as they used to in earlier times. Payment-making for things is ever-changing.
There are new types of money all around, some of which could pose, threats to the UK’s financial stability.
Among these trends, HM Treasury and the Bank of England have tested that there is a high possibility that there might be a future need for, a digital pound and a plethora of benefits that can be, gained from it.
The money issued by the UK’s central bank is the main reason for confidence in the monetary system. This type of money holds up the UK’s financial and monetary stability. Today, in the UK, banknotes are the only type of money provided by the bank for public use. Having a digital pound can help them to keep providing the main reason for the public to trust the digital pound for the UK.
Cash is also extremely, important to make sure that people are up to exchange one type of money for another type of money. For example, one can withdraw the money they have in their bank account in the form of bank notes at a cash machine. This is known as the “consistency” of money. Having a digital pound could help in; keeping this consistency in the future when most of the payments are in digital form.
The model proposed by the BoE and HM Treasury for the digital pound would help private companies to make payments efficient, to innovate, and give consumers more options. The digital pound can also help in, increasing the choices that people have for making payments.