UK’s Bank of England launches digital pound project as ‘new form’ of money

The Bank of England, the UK’s central bank, launched its long-awaited digital pound project, pitching the potential to create a new payment system and form of money. 

The potential digital currency would be issued solely by the central bank, with households and businesses able to hold the currency in a digital wallet accessible via smartphones or cards, a consultation document published on Tuesday said. 

”A UK central bank digital currency – a ‘digital pound’ – would be a new form of digital money for use by households and businesses for their everyday payments needs,” Chancellor of the Exchequer Jeremy Hunt, and Bank of England Governor Andrew Bailey said in a statement. 

The document is meant to solicit public comment and the report’s authors stressed several times that any digital currency plans were still at an early stage and might not be needed depending upon how the payments landscape evolved. If there is political and public demand to move forward then a prototype technology would be designed and tested before moving to a pilot project, the document said.

According to the proposal, wallets would be anonymized on the central bank’s ledger to address privacy concerns and the digital currency would non-programmable, meaning authorities can’t control how people spend their money.

The BoE also proposes an initial limit on the amount any individual could hold of up to £20,000, in order to manage the risks of deposits flowing out of the banking system.

Even if it did progress, building the necessary infrastructure would take several years to complete, the report said. 

The BoE also published a separate working paper on technological design considerations such as privacy, security and resilience.

There is now a four-month consultation period for the public to submit responses.

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