UK digital currency is being considered by the government task force
The UK government is set to set up a new task force to explore the possibility of a national digital currency, along with a range of potential reforms to boost the fintech sector.
The task force will be composed of representatives from the Bank of England and the Treasury. It will explore the possibility of adopting a central bank digital currency – an “e-pound” – and the risks and benefits associated with such a currency.
Last year, the Bank of England stated that it was considering introducing an electronic form of central bank money that could be used by households and businesses to make payments, in addition to cash and money in bank accounts.
A digital currency can be designed with certain purposes in mind, such as to make it easier to make small payments (such as a few cents to access content online with a paywall), or to allow taxes to become automatic deducted at the point of sale.
This could also reduce friction for international payments and provide an alternative to cash and card payments, while benefiting from a decline in cash payments accelerated by the coronavirus pandemic; By 2028, less than 10% of payments in the UK are expected to be made in cash.
The authorities have stated that they remain committed to providing cash to those who prefer it. “Our vision is for a more open, greener and more technologically advanced financial services industry,” said Chancellor Rishi Sunak.
“The UK is already known as a pioneer in innovation, but we need to go further. The steps I outlined today to drive growing fintech s, push the boundaries of digital finance and make our financial markets more efficient will drive us forward.
If we can harness the extraordinary potential of technology, we will strengthen the UK’s position as the world’s leading financial center. “
As part of Sunak’s plans to support the UK’s fintech sector, the Financial Conduct Authority is in the process of establishing a “scale box” to support companies trying to scale up new technologies.
Sunak has also committed to advise on proposals from a review on how companies list their shares in a public market in the UK. Digital currencies are being explored and introduced in a handful of other countries, building on the explosive popularity of cryptocurrency es such as bitcoin and ethereum (which are different from digital currencies controlled by central banks).
The Central Bank of the Bahamas has introduced the digital “Sand Dollar”, which offers the same value and consumer protection as a conventional Bahamian dollar.
The cost and inconvenience associated with money transfers between the 700 small islands were the main reasons for the introduction of the digital currency.
China is testing a digital currency in several cities and the head of the Swedish central bank recently suggested that his country could have a digital currency by 2026.The head of the European Central Bank has also indicated that he is interested in creating a digital euro.