“Britcoin” digital pound due to launch by end of the decade
A consultation is underway into a UK state-backed digital pound.
The Bank of England and the Treasury are investigating whether to create a central-bank digital currency (CBDC), commonly known as the digital pound and nicknamed “Britcoin”.
The new currency would be issued by the Bank of England for everyone to use for day-to-day spending. It won’t be a cryptocurrency, as these are issued by private companies. The Bank of England says that the value of crypto can be very volatile, but “Britcoin” will have a stable value over time.
It follows the government’s announcement in April 2022 that stablecoins will officially be recognised as a form of payment and brought into regulation.
What do we know about the digital pound?
The digital pound wouldn’t replace cash. Instead, you’d be able to use it in-store or online, similar to how you use your debit card.
Its value will be denominated in sterling. So £10 in digital pounds would always have the same value as a £10 banknote.
Bank of England deputy governor Jon Cunliffe said a limit of between 10,000 and 20,000 pounds per individual is likely to be imposed. This would be to strike a balance between managing risk and supporting wide usability. Based on this, it looks like the central bank is looking to avoid the digital pound becoming a means for storing wealth.
When can we expect the digital pound?
The Bank of England and the Treasury have begun their consultation into the possibility of the digital pound.
Chancellor Jeremy Hunt said: “We want to investigate what is possible first, whilst always making sure we protect financial stability.”
No firm decision has been made yet as to whether develop a digital pound, but Cunliffe said that it would be needed by the UK by the end of the decade.
Reports have suggested the earliest it would be built is 2025.
How will it be used?
One of the reasons for creating a digital pound will be to ensure the UK’s financial stability. The money issued by a central bank is designed to promote confidence.
As stablecoins and digital currencies grow, the Bank of England and the Treasury are keen to have their own version.
The digital pound will live in your digital wallet. In the future, it will be used for everyday payments like buying a morning coffee or paying for your groceries online. *Cryptocurrencies aren't regulated in the UK and there's no protection from the Financial Ombudsman or the Financial Services Compensation Scheme. Your capital is at risk. Capital gains tax on profits may apply. Cryptocurrencies are speculative and investing in them involves significant risks - they're highly volatile, vulnerable to hacking and sensitive to secondary activity. The value of investments can fall as well as rise and you may get back less than you invested. Past performance is no guarantee of future results. This content shouldn't be interpreted as a recommendation to invest. Before you invest, you should get advice and decide whether the potential return outweighs the risks. Finder, or the author, may have holdings in the cryptocurrencies discussed.