Chancellor Jeremy Hunt has stated that the creation of a British digital pound will create a ‘trusted and accessible’ way for the public to use cash in the digital age.

The state-backed Britcoin will not arrive before 2025, with the Treasury and Bank of England saying the next decade is a more realistic timeline.

The central bank digital currency (CBDC) would use blockchain technology currently used by cryptocurrencies to record transfers on a central digital ledger.

What is a Central Bank Digital Currency?

A CBDC would be a new form of digital currency which the Bank of England would issue and regulate for use by businesses and households.

Retail CBDC can be held directly by citizens and businesses. However, interbank – or wholesale – CBDC is limited to use by financial institutions and wholesale entities for interbank payments and financial settlement processes.

Britain’s hypothetical new digital currency would, the BoE explained, work alongside cash and bank deposits rather than replacing them outright.

Cash use has been decreasing steadily over the past decade, with BoE stats showing cash use in the UK dropped from 63% of all payments in 2006 to just 28% in 2018.

The Government and BoE insisted that no decision has been made on whether to introduce a digital currency in the UK, but the new taskforce will “engage widely” with stakeholders to assess the benefits, risks and the practical challenges associated with its introduction.

Reaction

The UK’s plans for a digital pound to be launched later this decade underscore that digital currencies are the future of finance and strengthen the case for cryptocurrencies such as Bitcoin, according to Nigel Green, CEO and founder of deVere Group.

Green says: “The announcement reflects what we and many others have been saying for a long time: that digital currencies are an inevitability in the ever more digital world in which we live. 

“If tech is increasingly at the core of how we live, work, do business and much more, it’s logical to have money that is also tech-driven too.

“It seems that this is now a view shared by the UK government.”

He continues: “As more and more countries introduce their own CBDCs, I’m confident that the case for cryptocurrencies, such as Bitcoin, will grow stronger.

“CBDCs might have many advantages, including convenience, efficiency and transparency, but what they do not offer the user is privacy. 

“Of course, the government and other CBDC proponents will object to criticisms, saying that they are ‘alarmist’. 

“But it is important to point out that these state-backed, programmable digital currencies will provide governments greater oversight of citizens’ transactions in real-time.

“They are going to be a game-changer in the financial system as they will be able to track and trace every purchase and monitor every penny of the money that’s being spent.”

“This, says Nigel Green, is why Bitcoin and cryptocurrencies, will become increasingly attractive. 

“They still have all the plusses of being digital, – speed, efficiency and convenience – but they are fundamentally different as they run on an open, immutable blockchain. They are global, borderless, tamper-proof and censorship-resistant.”

CBDCs are reportedly under development in more than 100 countries globally. 

Recommended

• What Does ScotlandIS’ New Chair of the Board see as the Industry’s Biggest Challenges?
• Biotechnology Network’s Investment in Scots Green Skills Hits £25M
• Digital Xtra Fund Opens 8th Funding Round

In the winter of 2022, the Beijing Winter Olympics were used to launch China’s new digital currency.

The digital yuan had already been trailled in various cities across China the year before, but the Games were the first time it was piloted on a global stage with mainly foreign users.

Nigel Green concludes that “we will have a multi-faceted system of currencies moving forwards. The mix will include fiat, CBDCs, and crypto. 

“Whilst there are pros and cons to all, for many people programmable CBDCs will be unattractive due to the privacy and government tracking concerns.”

Get all the latest news from DIGIT direct to your inbox

Our newsletter covers the latest technology and IT news from Scotland and beyond, as well as in-depth features and exclusive interviews with leading figures and rising stars.

To subscribe, click here.