Digital pound likely this decade, UK Treasury says

Finance & Banking Finance & Banking: In The News
, , ,
1

A state-backed digital pound is likely to be launched later this decade, according to the Treasury and the Bank of England. Both institutions want to ensure the public has access to safe money that is easy to use in the digital age. But it will not be built until at least 2025.

Cryptocurrencies are not backed by a central bank and the value can shoot up and down rapidly. But while it may use technology similar to cryptocurrencies such as Bitcoin and Ethereum, the digital pound, issued by the Bank of England, would be less volatile. Ten digital pounds will always be worth the same as Ā£10 in cash, the Treasury says. Though, as holidaymakers will know, the value of the pound does change relative to other currencies.

image
image1706Ɨ340 23.2 KB

Right now, there is probably little need for a digital pound. People use their debit cards or phones, or even watches to fulfil the same function. It is a solution to a problem that does not yet exist. But this is looking towards a near future that sounds like monetary science fiction. At its heart it is about data on what you spend, and what the entire population spends. It is a world where people might just choose to trust international private sector brands, in finance or in tech, more than the state. Think Amazon, or Facebook, or maybe Chinese-owned Alibaba or Tiktok having a version of sterling.

Companies that control the data on everything someone spends, when and where they spend it, will sit on a priceless asset. Unregulated digital currencies could offer those companies incentives to create walled gardens, fragmenting the pound system. It would make controlling the economy more difficult, because Ā£1 might not be worth Ā£1 everywhere.

This is where todayā€™s ideas come in. Neither the Bank of England nor Government would have access to the data on transactions with a digital pound. But consumers could pick providers, not just banks, to hold their cash in digital wallets, with varying degrees of privacy. Some users might be comfortable with their wallet provider knowing all their transactions, if they received a discount for example. Others might want to stay as private as possible. The Treasury wants to encourage innovation.

IMO, itā€™s another way for the rich to exploit the poor ā€¦ :man_shrugging:

2 Likes
2

Spot on Omah.

1 Like
3

I would rather use a Central Bank Digital Currency, regulated and backed by the Bank of England, than any of the unregulated cryptocurrencies that are springing up.
I would have thought people would be more likely to be fleeced by the current unregulated systems that are already around - they are at the mercy of fluctuating values of these privately-run currency systems.
A government backed CBDC would, in theory, be more stable and safer than the current unregulated systems.

I can see some advantages in having a government-backed digital alternative to cash - and those who donā€™t have bank accounts or who are struggling financially may find it useful to have a reliable method of paying for things which doesnā€™t involve using a bank account or bank payment cards.

If the UK Government / Treasury / Bank of England do decide to go ahead and introduce a digital currency, I will reserve judgement until I see the full details of the legislation and safeguards they build into it.

1 Like
4

They believe we are not aware of their intentions. Live within our means no matter what.

1 Like
5

Iā€™m sure that will be one outcome. But it strikes me that the concept will benefit the huge tech firms and their billionaire owners, and the dodgy money and its oligarch & criminal owners. And introduce yet another risk factor into the financial sector.

6

Isnā€™t that what I said ā€¦ but not in so many words?

7

Kind of, but I felt your emphasis was on the poor, whereas my emphasis was certain elements of the rich.

8

But how will the rich get richer if they donā€™t exploit the poor?

1 Like
9

Fingers in pies ā€¦ :wink:

10

People should realise that using digital currency means that the government can control what you spend your money on, or freeze your account if they donā€™t like how and what you are spending your money on.
For example, they could introduce a carbon tax. So if you spend money on barbeque food you may use up all of your carbon allowance and be refused fuel when you try to fill up your car.
Ask the Canadian Truckers, whose accounts were frozen because of their protests about vaccines. Imagine the strikers here in the news lately. You money is your independence and the freedom to be part of the community, you could be restricted from certain things.

1 Like
11

I think this is arse about face.

Surely it is actually just the opposite? Cash is king with criminals and tax avoiders, cash is mobile, untaxed and untraceable.

A digital pound will mean that all income can be taxed, GST/VAT paid and any windfalls have to be explained, it means sudden unexplained proceeds of crime will be far more difficult to launder.

It has benefits and disadvantages for all but its biggest advantage for government is taxation of both rich and poor. Arthur Daleyā€™s life will just be a bit more difficult but so will the oligarchā€™s tax avoidance schemes.

12

Rock and a hard place, as usual.

13

Yesterday, the Bank of England and the UK Treasury published a consultation paper on the digital pound, a U.K. Central Bank Digital Currency (CBDC) ā€“ mentioning Rippleā€™s technology at one point. In the 116-page document, the Central Bank of England describes why it is considering launching it and what the CBDC might look like.

The digital pound would be for everyday payments by households and businesses and would be stored directly at the Bank of England, but users would access it through digital wallets offered by private companies.

What role Ripple will play in the project is relatively unclear at this time. However, the U.S. company is mentioned in the consultation paper under the heading ā€œEnable private sector innovationā€ and in connection with RTGS (Real-Time Gross Settlement).

The report states that as part of the RTGS renewal program, the central bank is focusing on developing a roadmap for continuous improvement of the RTGS service in line with industry feedback and incorporating elements from previous feasibility studies and experiments.

In reference to this, the Bank of England cites two projects: a DLT proof of concept on which it worked with Baton Systems, Clearmatics Technologies Ltd, R3 and Token, and a cross-border synchronization project. This is where Ripple comes in:

Cross-border Synchronisation: a joint project with Ripple demonstrating that synchronised FX transactions in two different simulated RTGS systems can be achieved, leading to the incorporation of synchronisation functionality into the roadmap for renewal.

Furthermore, the central bank states that it has been working with industry to develop new strategies and structures so that the benefits of innovative technologies can be enjoyed by new types of private sector companies. For example, in 2017, the BoE expanded access by allowing non-bank payment service providers to apply for an RTGS settlement account.

In 2021, the Bank introduced its omnibus account policy, which allows payment system operators to fund their participantsā€™ balances with central bank money. And going forward, the Bank of England intends to continue to encourage innovation:

The Bank continues to engage with private sector firms to understand potential new models of wholesale settlement and how these can be supported going forward.

Whether this also refers to Ripple can only be speculated. In a footnote to its Ripple mention, the Bank of England refers to its website and the Ripple proof of concept from 2017.

There, it is stated that the central bank conducted a proof of concept with Ripple to explore the synchronized movement of two different currencies across two different real-time gross settlement systems connected to Ripple Connect and the Interledger protocol.

ā€œThis engagement concluded upon completion of this proof of concept. We will continue to work with businesses on fintech proofs-of-concepts whenever this may help us fulfill our mission,ā€ the Bank of England website reads.

Therefore, such news as ā€œthe Bank of England will work with Ripple for its CBDCā€ are definitely premature. Still, the connections between Ripple and the BoE are interesting. As Bitcoinist reported, Ripple is also part of the Digital Pound Foundation, a lobby group that supports the introduction of a digital pound.

A class action was filed against Ripple in May 2018 ā€œalleging that it led a scheme to raise hundreds of millions of dollars through unregistered sales of its XRP tokensā€. According to the complaint, ā€œthe company created billions of coins ā€˜out of thin airā€™ and then profited by selling them to the public in ā€˜what is essentially a never-ending initial coin offeringā€™ā€.

A bedfellow of ill-repute ā€¦ :roll_eyes:

14

ā€œIt is a solution to a problem that does not yet exist.ā€

Oh dear - I donā€™t think I want to cope anymore.

15

Yep Aerolor, digital cash will be like the energy travelling through the ā€œSmart Meterā€, the supply can be cut off remotely at any time. :laughing: :joy:

16

Oh come on, they can do that now, just shut the banks , turn off the ATMs - look at Lebanon recently!

Digital currency is no different to now in that regard

17

Thatā€™s Ok Bruce, provided all your debts are digital as well :grin:

18

That was nothing to do with digital currency.
It was their Bank Accounts which were frozen, so they wouldnā€™t have been able to draw cash out or make payments from their bank account either.

19

Yeah but, the Truckers may have squirreled away a few Dollars Under the bed in anticipation of accounts being frozen, donā€™t think you can do that with Digi Ā£s.

20

Yes, the Truckers may have squirrelled away Cash - but Cash will still be an option in UK even if digital currency is introduced.
As far as I can tell, the digital currency will provide another payment option but there are no plans to get rid of cash altogether - quite the opposite, in fact.

In the recent Financial Services and Markets Bill which has already been voted through the Commons and is currently at the Committee Stage in the Lords, the Government has included a section in the Bill to protect peopleā€™s access to Cash. This is in response to the gradual closing of ATMs and Banking outlets across the country.

Under the new rules, the financial regulator ā€“ the Financial Conduct Authority (FCA) - will be granted new powers over the UKā€™s largest banks and building societies, to ensure that cash withdrawal and deposit facilities are available in communities across the country.
The FCAā€™s new powers will allow it to address cash access issues at both a national and local level.