Treasury and Bank prepare for ‘Britcoin’ by 2030
Jeremy Hunt and Andrew Bailey to say it is ‘likely’ a digital pound will be needed as cash declines
THE Bank of England and Treasury will this week throw their weight behind a “digital pound” as they set out a roadmap to introduce a new central bank currency by 2030.
Andrew Bailey and Jeremy Hunt are expected to say it is “likely” that a new form of money will be needed as cash use continues to decline in an increasingly digital economy.
It is understood that any new statebacked digital currency – which has been given the moniker “Britcoin” in the press – would sit alongside cash. However, the plans are likely to fuel fears that physical currency could one day be phased out altogether.
The decision by Mr Hunt and Mr Bailey to back the project comes almost two years after Rishi Sunak, the Prime Minister, set up a taskforce as chancellor to explore whether to create a central bank digital currency (CBDC).
“On the basis of our work to date, the Bank of England and HM Treasury judge that it is likely a digital pound will be needed in the future,” the Bank of England Governor and current Chancellor say in extracts of a consultation paper seen by The Sunday Telegraph.
“It is too early to commit to build the infrastructure for one, but we are convinced that further preparatory work is justified,” they will say.
A CBDC would use blockchain technology used by cryptocurrencies to record transfers on a central digital ledger. The Bank of England already creates money digitally by issuing new reserves at commercial banks.
A CBDC would theoretically allow the Bank to issue new currency digitally directly to individuals or businesses. However, it is understood that the Bank is not exploring a route that would involve a direct relationship with the public where people could open an account at the Bank of England.
A CBDC would also allow people to hold digital currency on devices such as smartphones without the need for a bank account, similar to how physical cash can be held in a wallet.
The Bank and Treasury will launch a four-month consultation in which businesses, academics and the wider public will be invited to share their views on the launch of a digital pound.
It is understood the Bank and Treasury will begin the “design” phase of the project to develop a blueprint of how a digital pound could be constructed and used. The creation of a CBDC is expected to take several years and sources said it would involve “significant public investment”.
Officials have identified 2025 as “the earliest” date the Bank could start building and testing a currency prototype. No decision on whether to go ahead with a CBDC is expected until then. Other countries are already trialling national digital currencies, with China an early trailblazer.
Andrew Griffith, City minister, told the Treasury select committee: “There are some really important public policy issues about how you come forward with the design of a sovereign digital currency. We have to get them right. I would rather be right than be first.”
Lord King, the former Bank governor, warned last week that a CBDC offered “risks but no obvious benefits”.
A report by the Lords economic affairs committee also warned that the introduction of a CBDC could lead to more “state surveillance of people’s spending choices” or even “financial instability as people convert bank deposits to CBDC during periods of economic stress”. The Bank and Treasury declined to comment.