Britcoin UK is closer to launching a digital currency

London – British authorities said on Monday that British businesses and consumers are likely to need a digital version of the pound and officially asked for public comment on the idea of ​​introducing a central bank digital currency.

Britain, home to the world’s second-largest financial center, has lagged behind former colonies such as Nigeria, the Bahamas and Jamaica in deploying digital currency. According to consultant PwC, more than 80% of the world’s central banks are considering launching digital currencies or have already done so.

“While cash is here to stay, the digital pound, launched and supported by the Bank of England, can be a new way of payment that is secure, affordable and easy to use,” Chancellor of the Exchequer Jeremy Hunt said in a statement. “That’s why we want to first explore what’s possible, while always making sure we’re protecting financial stability.”

The call for public input comes nearly two years after the Treasury and the Bank of England said they were considering a digital currency.

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

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

The industry has been particularly volatile in recent months, fueling calls for more regulation. Last year’s crypto crash left assets in tatters, and the multibillion-dollar collapse and bankruptcy of crypto exchange FTX in November prompted fraud allegations against founder Sam Bankman-Fried.

The proposed digital currency will be denominated in pounds, with 10 pounds of the digital currency always being equal to a 10 pound note, the bank said. Currency stored in a digital wallet could be used to pay for goods and services electronically.

Proponents of central bank digital currencies say they make digital transactions easier and cheaper and increase access to the financial system because they can be used by people who don’t 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, while China and more than 20 other countries have launched pilot projects. The United States and the European Union are considering the possibility of introducing digital currencies.

But digital currencies also pose risks, including cyber attacks, privacy concerns and the danger that they can be exploited by criminals.

Critics argue that money invested in central bank digital currencies is safer than a bank deposit, and so it can also take savings away from commercial banks and weaken the financial system.

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

While such digital currencies may be useful in countries that do not have effective banking systems, this is 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 financial technology, but we need to be selective and not be driven by misplaced enthusiasm for anything crypto-related,” King said.