The Bank of England and the Treasury are set to introduce the idea of a “digital pound” CBDC in a roadmap to be launched next week. The central bank currency, which has been dubbed “Britcoin,” could be in use by 2030 and will sit alongside the traditional physical currency. Despite this, there are fears that the physical currency could eventually be phased out.
What the bank think about the CBDC
Andrew Bailey, the Governor of the Bank of England, and Jeremy Hunt, the Chancellor, will lead the digital pound launch two years after Prime Minister Rishi Sunak set up a task force to explore the creation of a central bank digital currency (CBDC).
The Bank of England and the Treasury believe that a digital pound will be needed in the future, however, it is still too early to build the necessary infrastructure.
The CBDC would be based on blockchain technology and would use a central digital ledger to record transfers. The Bank of England currently creates money digitally by issuing new reserves at commercial banks, but the CBDC would allow the bank to issue the currency digitally directly to individuals or businesses.
However, the Bank of England will not have a direct relationship with the public, as it will not allow people to open an account at the bank.
The CBDC will allow people to hold digital currency on devices such as smartphones without the need for a bank account, similar to physical currency held in a wallet. Britcoin will be issued by the Bank of England and will have the same value as its physical currency equivalent.
The Bank and the Treasury will launch a four-month consultation in which the public, academics, and businesses will be invited to share their views on the launch of a digital pound.
The government passed legislation last year to protect access to cash, and the Bank has previously stated that the digital pound will sit alongside physical currency and not replace it.
The Bank and the Treasury will begin the “design” phase of the project, which will involve developing a blueprint for the digital pound’s construction and use.
The earliest date for the launch of the digital pound is 2025, and a decision on whether to proceed with the CBDC will not be made until then.
Debate on the digital pound
The Bank of England has argued that a CBDC would foster competition and ensure that no private sector firm dominates the market. The CBDC would also allow people to access cash via a smartphone or card, with services regulated similarly to banks.
Critics of the digital pound, including former Bank of England Governor, Lord King, have warned that introducing a CBDC could lead to state surveillance of people’s spending choices or even financial instability during periods of economic stress.
Lord King has also argued that introducing a CBDC offers “risks but no obvious benefits” and that most transactions are already digital and served well by the current commercial banking system.
A Lords Economic Affairs Committee report has also warned that introducing a CBDC could lead to more state surveillance of people’s spending choices, or currency could eventually be phased out.
Source: https://www.cryptopolitan.com/bank-of-england-predicts-cbdc-by-2030/