Britishcoin? UK moves closer to launching digital currency

LONDON — Britcoin is getting closer to reality.

UK authorities said on Monday that UK businesses and consumers are likely to need a digital version of the pound, formally seeking public comment on the idea of ​​introducing a central bank digital currency.

Britain, home to the world’s second-largest financial center, is lagging behind former colonies such as Nigeria, the Bahamas and Jamaica in rolling out a digital currency. More than 80% of the world’s central banks are planning to launch digital currencies or have already done so, according to consultant PwC.

“While cash is here to stay, a digital pound issued and backed by the Bank of England could be a reliable, accessible and easy-to-use new way to pay,” Treasury Chief Jeremy Hunt said in a statement. communicated. “That’s why we want to explore what’s possible first, while always ensuring that financial stability is protected.”

The call for public input comes nearly two years after the Treasury and the Bank of England announced plans to introduce a digital currency.

While Prime Minister Rishi Sunak suggested naming the initiative “Britcoin” when he was Treasury chief, the Bank of England stressed that the potential currency should not be confused with cryptocurrencies like Bitcoin.

Backed by the central bank, the new currency would be “reliable and hold its value over time”, unlike cryptocurrencies which can fluctuate wildly and threaten investors’ holdings, the Bank of England says on its website.

This industry has been particularly volatile in recent months, intensifying calls for greater regulation. Crypto crashes last year sent assets plummeting, while the multi-billion dollar collapse and bankruptcy of crypto exchange FTX in November sparked fraud charges against founder Sam Bankman-Fried.

The proposed digital currency would be denominated in pounds, with 10 pounds of digital currency still equaling a 10-pound note, the bank said. Held in a digital wallet, the currency could be used to pay for goods and services electronically.

Proponents of central bank digital currencies claim that they make digital transactions easier and cheaper and expand access to the financial system because they can be used by people who do not have bank accounts.

This is one of the reasons why the Bahamas became the first country to introduce a digital currency in 2020. Nigeria and Jamaica have since followed suit, with China and more than 20 other countries carrying out trial projects. . The United States and the European Union are planning to introduce digital currencies.

But digital currencies also come with risks, including cyberattacks, privacy issues, and the danger that they can be used by criminals.

Because money invested in central bank digital currencies is safer than a bank deposit, they can also divert commercial bank savings and weaken the financial system, critics say.

A digital pound would have “risks but no obvious benefits,” former Bank of England Governor Mervyn King, now a member of the House of Lords, recently said.

While these digital currencies can be useful in countries that don’t have efficient banking systems, that’s not the case in Britain, he said.

“The government has said it wants the UK to be at the forefront of innovation, crypto-assets and fintech, but we need to be selective and not driven by misplaced enthusiasm for everything. when it comes to crypto,” King said.