Rishi Sunak – the UK’s Chancellor of the Exchequer – has revealed further details about the progress of the Treasury taskforce on Central Bank Digital Currencies (CBDCs).
The Chancellor explained the proposed CBDC – already dubbed ‘Britcoin’ – would be a new form of digital currency issued by the Bank of England for day-to-day household usage as well as commerce by businesses.
In his post, the 41-year-old explained the proposed currency would be aimed at keeping the powerful British financial system at the cutting edge of technology, but stressed it would avoid replacing existing fiat cash systems.
“We know that cash remains vital for millions of people and are fully committed to ensuring people across the UK can continue to access it,” he said.
The Chancellor went on to explain how discussions of the CBDC over the past year have actually helped to reinforce and modernise traditional cash systems. He pointed to the Financial Services Act 2021, which has opened up purchase-free cash-back from all UK businesses, alongside new proposals aimed at mandating limited distance requirements to ensure access to banking.
“By supporting innovation and technology, while also ensuring continued access to cash, we are making sure we have a sustainable and innovative payments landscape for decades to come,” he added.
This follows news from earlier in the year about the launch of a new joint task force within the Bank of England to explore the case for introducing a Central Bank Digital Currency in the UK.
It also includes two new forums to engage technical experts and key stakeholders (including financial institutions, merchants, business users, and civil society groups) throughout the Britcoin proposal process.
The task force provides a strategic approach to the creation of a CBDC, and exists to coordinate exploration of potential use cases, opportunities and risks, so as to ensure the UK doesn’t fall behind in fintech innovation and remains at the forefront of international banking.
The aim is to provide an extensive evaluation for a Britcoin design grounded in a rigorous, coherent and comprehensive assessment of the overall case for a UK CBDC – evidenced by international CBDC developments.
The Bank of England Deputy Governor, Jon Cunliffe, is surprisingly welcoming of cryptocurrencies, and stresses the state-bank see it as an innovation not a threat.
“The speculative boom in crypto is very noticeable but I don’t think it’s crossed the boundary into financial stability risk,” he said in an interview with CNBC’s Joumanna Bercetche.
“There are issues of investor protection here. These are highly speculative assets, but they’re not of the size that they would cause financial stability risk, and they’re not connected deeply into the standing financial system.
“Were we to start to see those links develop, were we to start to see it move out of retail more into wholesale and see the financial sector more exposed, then I think you might start to think about risk in that sense.”
In June, the Bank of England published its second discussion paper on CBDCs. The paper explores the implications of unregulated private stablecoins for pricing and the credit market, and suggests that a Britcoin could present an efficient solution to this while retaining centralised control of monetary policy.
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