The Digital Pound: What is The Case for Issuing it?

Your day-to-day spending could take a different turn once the digital pound comes into play. Your online-store shopping experience could be more seamless thanks to this new piece of technology by the UK government.

The central bank digital currency (CBDC) has slowly made headlines in the digital space. In the UK, you may hear names like ‘digital sterling’ or even ‘Britcoin.’. Typically, the UK CBDC is referred to as the digital pound.

With its value tied to the sterling pound, the digital pound’s value would always be stable. Like traditional banknotes, £10 in digital pounds will consistently maintain equal value to £10. 

If introduced, the digital pound would not replace cash. The Bank of England understands how important cash is to the masses. More reason why it would continue to supply cash currency for as long as people want it. 

Moreover, the digital pound would not be deemed as a cryptocurrency or a crypto asset. Unlike cryptocurrencies which are issued privately, the digital pound issuance will be done by the Bank of England, backed by the UK government.

How Would it Work? 

A day in the life of a digital pound user unfolds seamlessly with such like transactions: 

• 7 am: Start the day by checking your digital pound wallet balance.
• 10 am: Utilize your smartphone to effortlessly purchase a cup of tea using digital pounds—just a simple tap on the same device used for credit and debit cards.
• 3 pm: Pay the electrician with digital pounds, and both parties receive instant notifications confirming the completion of the payment.
• 6 pm: Streamline the evening by ordering groceries online and conveniently paying for them using the digital pound option during the website checkout process.
• 8 pm: Wrap up the day by transferring money from your bank account into your digital pound wallet, ensuring a seamless financial transition.  

All in all, a digital pound proves to be a valuable asset in managing daily transactions efficiently.

The Need for

Basically, the way people continue to pay for goods or services keeps changing. People are not using much fiat as they were a decade ago as they are now opting more for digital payments methods. This is catapulted by several reasons, safety and technology advancements being core factors.

Today, there are plenty of forms of money. In light of these trends, the Bank of England and HM conclude a probability of the digital pound is in the looming. The money issued by the Bank of England boosted the confidence in the UK’s monetary system. As it stands, banknotes are the only form of money made available to the public. 

In its uniqueness, cash is quite important as you need it to acquire any other form of currency as well. For example, you can go to the ATM or bank and withdraw banknotes. The digital pound would help this money uniformity seamlessly. Digital Pound would also help improve the options people have upon making payments.

Taskforce

It goes back to April 2021, Fintech Week, when the Chancellor introduced the Digital Pound Taskforce (previously called the CBDC Taskforce). This collaborative effort involves HM Treasury and the Bank of England, working together to delve into the possibilities of a UK CBDC. Notably, the task force played an important role in shaping the Consultation Paper released on February 7, 2023.

The Bank of England is in constant talks with various business sectors in research and a bid to come up with its own CBDC.

These include:

• CBDC Academic Advisory Group
• CBDC Academic Advisory Group
• CBDC Engagement Forum
• Digital Pound Working Groups
• CBDC Technology Forum.

The Bank of England hasn’t decided yet about bringing in the digital pound. In the coming 2 to 3 years, they’ll be shifting gears into the design phase, delving into the technology and policy needs for a digital pound. If this phase shows that the digital pound is a go, the next step would be the build phase. We can safely expect to see the digital pound in action within a decade.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.