The Bank of England and HM Treasury have published their response to a consultation on a digital pound that was started in February 2023.
The proposals for a digital pound include:
- It would complement the role of cash and give people and businesses more choice in how they make and accept payments.
- The Bank of England would issue it and it would be convenient and widely available.
- It would hold the same value as the equivalent banknote or coin, i.e. £10 of digital pound would always be worth the same as £10 in banknotes or coins.
- It would be easily exchangeable with other forms of money, such as cash.
- The public and businesses would access their digital pounds through digital wallets offered by the private sector through smartphones or smartcards.
- It would be intended for payments online, in-store, and between individuals. It would not be used for savings and it would not pay interest.
- At least initially, there would be restrictions on how much a business or individual could hold.
A digital pound would be a claim on the Bank of England, like banknotes. So, it would have intrinsic value and be stable, unlike cryptoassets that are unbacked.
There has been no final decision to pursue a digital pound, but work will continue to explore its feasibility and potential design choices.
Feedback received from the consultation seems largely to have been supportive, however concerns have been raised about what a digital pound implies for access to cash, privacy for users, and control of their money.
The published response has confirmed that legislation would be introduced to protect and guarantee users’ privacy and control if the decision to go ahead does occur. It also confirms that neither the Bank of England nor the government would have any access to personal data and users would be free to spend their digital pounds as they choose.
While there is no final decision as yet, clearly there is a willingness to continue considering the idea of a digital pound and this is unlikely to be the last word on the subject.
See the response in full at: https://www.bankofengland.co.uk/paper/2024/responses-to-the-digital-pound-consultation-paper