Britcoin is moving closer to reality. British authorities on Monday said that businesses and consumers in the UK are likely to need a digital version of the pound, formally asking for public comment on the idea of introducing a central bank digital currency.
The UK, home to the world’s second-biggest financial center, is trailing former colonies such as Nigeria, the Bahamas and Jamaica in rolling out a digital currency.
More than 80 percent of the world’s central banks are considering launching digital currencies or have already done so, PricewaterhouseCoopers says.
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“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,” British Chancellor of the Exchequer Jeremy Hunt said in a statement. “That’s why we want to investigate what is possible first, whilst always making sure we protect financial stability.”
The call for public input comes almost two years after the British Treasury and the Bank of England said they were considering introducing a digital currency.
While British Prime Minister Rishi Sunak suggested naming the initiative “Britcoin” when he was Treasury chief, the Bank of England has said that the potential currency should not be confused with cryptocurrencies such as bitcoin.
Backed by the central bank, the new currency would be “reliable and retain its value over time,” in contrast to cryptocurrencies that can fluctuate wildly and threaten the holdings of investors, the Bank of England says on its Web site.
That industry has been particularly unstable in the past few months, escalating calls for greater regulation. Crypto crashes last year tanked assets, while crypto exchange FTX’s multibillion-dollar collapse and bankruptcy in November last year triggered fraud charges against founder Sam Bankman-Fried.
The proposed digital currency would be denominated in pounds, with 10 pounds of digital currency always equal to a 10-pound note, the bank said.
Held in a digital wallet, the currency could be used to pay for goods and services electronically.
Supporters of central bank digital currencies say they make digital transactions easier and cheaper, and expand access to the financial system, because they can be used by people who do not have bank accounts.
This is one of the reasons the Bahamas became the first country to introduce a digital currency in 2020. Nigeria and Jamaica have since followed suit, with China and more than 20 other countries running trial projects. The US and EU are also considering introducing digital currencies.
Yet digital currencies also present risks, including cyberattacks, privacy concerns and the danger that they can be used by criminals.
As money invested in central bank digital currencies is safer than a bank deposit, they also might draw savings away from commercial banks and weaken the financial system, critics say.
A digital pound would have “risks, but no obvious benefits,” former Bank of England governor Mervyn King, now a member of the House of Lords, has said.
While such digital currencies might be useful in countries that do not have effective banking systems, that is not the case in the UK, he said.
“The government has said that it wants the UK to be at the forefront of innovation, crypto-assets and fintech, but we need to be selective and not driven by a misplaced enthusiasm for all things crypto,” King said.
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