UK plans digital pound on blockchain, touts potential for ‘efficiency’ in payments

February 8, 2023, 4:31 PM UTC
The UK may release its own digital pound sterling.
Karol Serewis—SOPA Images/LightRocket via Getty Images

The United Kingdom may be coming around to the idea of a digital pound.

The Bank of England and the government’s treasury office announced that they are considering issuing a blockchain-based central bank digital currency (CBDC) that would be akin to its pound sterling.

The cryptocurrency-like tender would be issued by the government in the same way as the physical pound sterling but would be stored in digital wallets created by private companies. It would not replace the physical pound but could still be used to pay for anything from a cup of coffee to an electrician, according to the Bank of England’s website.

“While cash is here to stay, a digital pound issued and backed by the Bank of England could be a new way to pay that’s trusted, accessible and easy to use,” Jeremy Hunt the UK’s chancellor of the exchequer said in a statement.

The government’s plan is to design the CBDC over the next two to three years, but it’s unclear when it would be implemented, if at all. The Bank of England claims that issuing the digital pound would help the UK adapt to changing times, and protect its financial system from new forms of money that could pose risks to its stability.

“We think the digital pound could help us maintain trust in money and protect our financial system, while also improving payments by increasing efficiency and enabling innovation,” the UK central bank’s website said.

Countries like China, Nigeria, and The Bahamas have already instituted their own CBDC and several other countries are likewise considering it.

Advocates argue that the government-issued digital currencies can help extend the financial system to the unbanked and help the government send funds easily in emergency situations.

Detractors say issuing a digital version of a fiat currency gives governments too much power over individuals’ finances.

In both Nigeria and The Bahamas the population has been slow to fully embrace digital currency, and the collapse of the crypto exchange FTX last year has generated mistrust of cryptocurrency more broadly.

The U.S. is also still considering issuing a CBDC after President Joe Biden signed an executive order last year that called for urgency in researching and developing a digital currency, should it be deemed necessary.

From now until June 7, 2023, the UK government is asking the public for feedback on the idea of issuing a CBDC.

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