The Bank of England and the UK Treasury are expected to announce plans for a digital pound, called "Britcoin," to be introduced as the new central bank currency by 2030. The move is in response to the declining use of cash in an increasingly digital economy. The digital currency will be used alongside traditional cash currencies to prevent physical cash from being phased out entirely. The "Britcoin" project was first proposed in 2021 by Prime Minister Rishi Sunak, who formed a working group to explore the creation of a central bank digital currency using blockchain technology. The digital currency will allow people to hold money on devices like smartphones without a bank account. The Bank of England and the Treasury will consult with businesses, academics, and the public for four months before starting the design stage, which could take several years. Testing a prototype for the currency is expected to start in 2025. The British government has issued legislation to protect cash, stressing that any digital currency will remain alongside cash and not be a substitute for it.
The introduction of a digital pound raises concerns about the possible phasing out of traditional cash, but officials have emphasized that the digital currency will exist alongside cash rather than replacing it. The Bank of England creates money digitally by issuing new reserves in commercial banks, but a bank's digital currency would allow the bank to issue new digital currency directly to individuals or businesses. The new state-backed digital currency is intended to use the same technology as cryptocurrencies to record transfers on a central digital ledger.
British MP Andrew Griffiths has emphasized the importance of designing a sovereign digital currency correctly without any errors, as there are important public policy issues around this matter. The Bank of England and the Treasury will invite businesses, academics, and the public to share their views on the launch of the new digital pound during the four-month consultation period.
It is expected that the Bank of England and the Treasury will begin the design stage for the digital pound, which may take several years. Officials have identified 2025 as the year when testing for a prototype of the currency will begin. The earliest date for launching central bank currencies in the United Kingdom is expected to be in the second half of the current decade.
The creation of a digital pound is seen as a response to the declining use of cash in an increasingly digital economy, and it is expected to provide benefits such as faster and cheaper transactions, increased financial inclusion, and reduced fraud and money laundering. It is also expected to enable the Bank of England to have greater control over the money supply and to monitor transactions more effectively.
However, the introduction of a digital currency also raises some concerns, such as the potential for cyber attacks and the loss of privacy. There are also concerns about the impact of a digital currency on the banking system, as banks may lose their role as intermediaries in financial transactions.
Overall, the introduction of a digital pound is seen as a significant step towards a more digital and efficient economy, but it will require careful consideration and planning to ensure that it is introduced in a safe and effective manner. The consultation period is an important opportunity for businesses, academics, and the public to provide feedback and input on the development of the new digital currency.