It would be a new form of digital money for use by households and businesses for everyday payment needs. As part of the wider landscape of money and payments it would sit alongside, not replace, cash – a digital counterpart to familiar, trusted banknotes and coins, subject to rigorous standards of privacy and data protection. The general idea is that the US, China and EU have reviewed the need and are consulting on whether digital money is required. The government want to ensure that public trust in money remains high, and that modern forms of money and payments meet the evolving needs of individuals and businesses.
This type of money is known as a central bank digital currency (CBDC). It can also be referred to as ‘digital sterling’ or even ‘Britcoin’. However, as the more common name is the digital pound.
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, it would not replace cash. Being able to use cash is important for many people. That’s why cash will continue to be issued for as long as people want to keep using it.
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.
HM Treasury and the Bank of England have published a joint consultation. The consultation paper sets out analysis by HM Treasury and the Bank of England on the potential case for a UK central bank digital currency – a “digital pound” and consult on the key features of a potential model. HMRC comments:
“Although it is too early to commit to build the infrastructure for a digital pound, the Bank of England and the Government are convinced that further preparatory work is justified to appropriately respond to the emergence of new technologies, international developments and fresh opportunities. In the four-month consultation period, officials in my department and the Bank of England will engage extensively across the UK to seek views on a potential digital pound. Responses to the consultation are invited from all interested members of the public, experts, and the widest range of organisations.
This consultation is a vital step in positioning the UK to act decisively by introducing a digital pound, should we choose to do so.”