The UK government and the Bank of England are taking landmark steps towards the creation of a Central Bank Digital Currency, joining other nations that include China and Bahamas in the digital currency drive.
A press release issued on the government’s website announced the creation of a body with the mandate to coordinate on the possibility of a Bank of England-issued digital money for use by households and businesses.
If approved, the digital currency would exist alongside other payment options, rather than replace them.
Discussing this at Fintech Week, Chancellor Rishi Sunak elaborated on the initiatives put in place with regulatory support and structural reforms toward the British drive on a central bank digital currency.
Chancellor of the Exchequer, Rishi Sunak said:
“Our vision is for a more open, greener, and more technologically advanced financial services sector. The UK is already known for being at the forefront of innovation, but we need to go further. The steps I’ve outlined today, to boost growing fintechs push the boundaries of digital finance and make our financial markets more efficient, will propel us forward. And if we can capture the extraordinary potential of technology, we’ll cement the UK’s position as the world’s pre-eminent financial centre.
A new Taskforce, bringing together HM Treasury and the Bank of England, will be established to explore a possible UK central bank digital currency (CBDC).
Two new forums will also be established to engage technical experts and key stakeholders (including financial institutions, merchants, business users, civil society groups, and consumers) through the process.”
A digital currency is a cash balance system recorded electronically on a store value card, or other physical devices, which could someday replace the physical notes of the British pound or Naira.
Digital currencies could be decentralized, a condition where the control over the cash supply could come from diverse sources. Additionally, Digital currencies could also be centralized, a condition where there is a midpoint of control over the cash supply, simulating the way central banks operate today.
Recently, the United States has been making their plans towards developing a digital dollar known to the public. The world’s superpower was awakened by the successful progress that China’s Digital Yuan achieved since they began exploring CBDC.
Now, the US is taking the technology of creating a CBDC seriously and is now making the claim that “it is the future of money”.
According to Justin Muzinich, the deputy Treasury Secretary, they are studying a potential central bank digital currency (CBDC) tied to the dollar, alongside the Federal Reserve which is the U.S. Central Bank.
“It’s something we’re studying … This is really a decision which sits as much with the Fed as it does with Treasury,” he said.
