The Bank of England (BoE) and the Treasury have started a formal consultation to create a UK central bank digital currency (CBDC). According to the Treasury and Bank of England, the digital pound will most likely be introduced later this decade.
The Bank of England will issue a new version of sterling known as the digital pound. Along with cash and bank deposits, it will be utilized for everyday payments. The CBDC Taskforce, which was announced in April 2021, is in charge of the consultation paper.
CBDC, according to Chancellor Jeremy Hunt, might be a new way to pay that is trusted, accessible, and simple to use. The digital pound could be introduced in the second half of the decade at the earliest.
Cryptocurrencies are extremely volatile since they are not backed by a central bank. CBDCs, on the other hand, are backed by national banks, making them less volatile. According to the Treasury, ten digital pounds will always be worth the equivalent of £10 in actual money. The public is being asked to provide feedback on the upcoming consultation. The consultation is open for feedback through June 7, 2023.
Along with the Consultation Paper, a Technical Working Paper has been issued. It focuses on the digital pound’s technological requirements and design issues. It highlights a set of design principles applicable to the digital pound in terms of privacy, efficiency, reliability, resilience, scalability, and energy consumption.
The Technical Working Paper, according to the Bank of England, explores technology design considerations that help to form a basis for the bank’s current thinking on the technology requirements of a UK CBDC, and which will likely have a significant impact on the design choices for CBDC.
According to a report by Atlantic Council, more than 20 countries, including Brazil, South Korea, Australia, Russia, and India, will either continue or commence pilot testing of a CBDC this year. Over 110 countries are researching a CBDC, which is a significant increase from the 35 countries which were considering a CBDC in May 2020. About 60 countries are either in the development, pilot, or launch phase of a CBDC exploration.