Bank of England considers digital currency

Bank of England considers digital currency

The UK Treasury and Bank of England are setting up a "Central Bank Digital Currency" taskforce to investigate creating a digital pound. The rise of cryptocurrency has seen governments around the world take a serious look at how a completely digital financial system may look.

The so-called "BritCoin" would mean that individuals and businesses would be able to hold currency directly with the Bank of England, rather than going through high street bank accounts. The UK is not the first country to look at a state backed digital currency, as China is already considering a similar proposal.

Digital currencies like this would likely utilise the block-chain technology that powers Bitcoin and other cryptocurrencies, but would not be seen as a speculative investment that shows the same levels of volatility.

It is important to note that this proposed currency would work alongside the existing Pound, so that they are in parity - a "digital banknote" for GBP:

The Bank provides physical money in the form of banknotes, which can be used by households and businesses to make payments. We also provide electronic money, but this can only be used by banks and selected financial institutions. A Central Bank Digital Currency would make electronic money, issued by the Bank of England, available to all households and businesses. This would allow everyone to make electronic payments in central bank money.

If a CBDC were to be introduced, it would be denominated in pounds sterling, just like banknotes, so £10 of CBDC would always be worth the same as a £10 note. CBDC is sometimes thought of as equivalent to a digital banknote, although in some respects it may have as much in common with a bank deposit. Any CBDC would be introduced alongside – rather than replacing – cash and bank deposits.

You can read a little more on this BoE info page:

Ian Cunningham
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