A new organisation, the Digital Pound Foundation, has launched to support the creation of a UK Central Bank Digital Currency (CBDC).
The independent, non-profit forum aims to support the implementation of a digital Pound and digital money ecosystem. It will act as a think tank to explore the issues relating to creating digital currencies, as well as an industry sandbox to test new solutions.
In addition, the group will help advocate and promote regulations to encourage the UK’s CBDC project. It will use its members’ expertise and experience to research and explore the design, development, implementation and roll-out of a digital Pound.
Its founding members are Billion, CGI, Electroneum, Ripple, and Quant, with Accenture and Avalanche as associate members.
According to the new group, a digital Pound will help the UK maintain its lead in the global fintech industry, as well as support the transition to an innovative, inclusive digital economy and society.
Digital Pound Foundation Chairman and former Barclays Deputy Chairman for Corporate Banking Jeremy Wilson said: “Technology is transforming human interaction and money must adapt to that. The world has become a global laboratory realising the benefits of a new form of money.
“The social ramifications of this shift will affect everyone. The Digital Pound Foundation seeks to support the UK in bringing that about for the benefit of all”.
What are CBDCs?
They’re not cryptocurrencies – both proponents and opponents of CBDCs want to make that clear.
CBDCs are essentially a virtual form of a country’s fiat currency. Issued and regulated by central banks, they are digital tokens backed by monetary reserves.
Their benefit is that they can make it simpler for countries to implement fiscal policy. While electronic money exists, it is used by banks to make transfers. A CBDC would allow households and businesses to hold electronic accounts, promoting financial inclusion.
Ultimately, a CBDC cannot be removed from the network, i.e. converted into physical cash. This makes it attractive to governments, as it means a token could not disappear into the real world.
Fans of cryptocurrency don’t like that a CBDC is controlled by a central authority, a key benefit of tokens like Bitcoin. This means CBDCs can’t be used with the same degree of privacy as cryptocurrencies, or indeed, coins and banknotes.
Meanwhile, CBDC supporters want to avoid comparisons to highly volatile cryptocurrencies, which are frequently used in criminal transactions.
Ultimately, these are the two issues surrounding CBDCs – on the one hand, increased compliance, helping reduce money laundering and tax evasion. On the other, loss of privacy and increase surveillance, potentially even breaching regulations such as GDPR.
There are also issues around financial inclusion. Supporters say a digital Pound will help make electronic payments more inclusive. However, CBDCs are largely seen as a step away from physical currencies altogether.
“CBDCs and other new forms of digital money can leverage frontier technologies for development of features such as programmable money, more inclusive payments services, and more robust and resilient payments infrastructure, enabling the UK’s transition to a digital economy,” a Digital Pound Foundation statement read.
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At present, no country has implemented a CBDC, though many are currently developing them.
The Digital Pound Foundation cited research from the Bank of International Settlements (BIS) claiming that 10% of central banks representing 20% of the world’s population are looking to issue CBDCs within the next three years.
In April this year, the Bank of England and HM Treasury established the CBDC Engagement and Technology Forums.
The organisation aims to gather strategic input from senior stakeholders across industry, civil society, and academia to understand policy considerations and functional requirements pertaining to creating CBDC.
Join the Conversation: Digital Transformation 2021 Summit
The role digitisation can play in the future of the UK economy will be a key theme at the upcoming Digital Transformation Summit on 28th October.
Now in its sixth year, the Summit has established itself as Scotland’s largest annual conference focussed on digitalisation and organisational change.
For more information on how to register a free place visit: https://www.digifutures.co.uk/