Bank of England takes first steps towards digital pound with consultation

 (John Walton/PA) (PA Wire)
(John Walton/PA) (PA Wire)

The Bank of England has taken its first steps towards creating a new form of currency after beginning a consultation on the introduction of its own digital pound.

The consultation, which has been launched in conjunction with the Treasury, sets out proposals on how the digital currency would operate and invites businesses and members of the public to review its design and implementation.

A digital pound would be issued by the Bank of England and could be used by households and businesses for everyday payments in-store and online, according to the Bank. If introduced, the currency would be interchangeable with cash and bank deposits, complementing existing cash payments. It wouldn’t be intended for savings and would not pay interest.

“Unlike cryptoassets and stablecoins, the digital pound would be issued by the Bank of England and not the private sector,” the Bank of England said in a statement.

“This means that it will have intrinsic value and not be volatile, unlike unbacked cryptoassets as there would be a central authority to back it.”

Read more: The Bank of England’s proposed digital pound: what does it mean?

Neither the Government nor the Bank would have access to personal data and holders would have the same level of privacy as a bank account, according to the central bank.

Governor of the Bank of England, Andrew Bailey, said: “As the world around us and the way we pay for things becomes more digitalised, the case for a digital pound in the future continues to grow. A digital pound would provide a new way to pay, help businesses, maintain trust in money and better protect financial stability.

“However, there are a number of implications which our technical work will need to carefully consider. This consultation and the further work the Bank will now do will be the foundation for what would be a profound decision for the country on the way we use money.”

The Treasury has yet to take a final decision on whether to introduce a digital currency. If it did go ahead, a limit on individuals’ holdings would apply at least in the introductory phase, according to the Bank of England, which argues that a limit would “strike a balance between both encouraging use and managing risks, such as the potential for large and rapid outflows from banking deposits into digital pounds.”