Key Points:
- The Bank of England launches its long-awaited digital pound initiative, touting the potential for a new payment system and form of money.
- The central bank would be the exclusive issuer of the currency, with people and companies able to store it in a digital wallet accessible via cell phones or cards.
The Bank of England, the United Kingdom’s central bank, has launched its long-awaited digital pound initiative, touting the potential for a new payment system and form of money.
According to a consultation document published on Tuesday, the proposed digital currency would be issued entirely by the central bank, with households and companies able to hold the currency in a digital wallet accessible via cell phones or cards.
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. 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 document is intended to elicit public feedback, and the report’s authors highlighted multiple times that any digital currency plans were still in the early stages and may not be required depending on how the payments landscape evolved.
If there is enough political and public support to move forward, a prototype technology would be developed and tested before moving on to a pilot project, according to the document.
The work over the next two to three years will inform that decision and will reduce the lead time to launch should the decision at the end of this stage be to implement the digital pound in the UK, which could then be introduced in the second half of the decade.
To address privacy concerns, wallets would be anonymous on the central bank’s ledger, and the digital currency would be non-programmable, implying that authorities would have no control over how people spend their money.
In order to manage the dangers of deposits flowing out of the banking system, the Bank of England also suggests an of between £10,000 and £20,000 initial limit on the amount any individual could hold.
Even if it did advance, the research stated that constructing the requisite infrastructure would take several years.
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