On Feb. 7, the Bank of England and the HM Treasury department published a consultation paper on the “digital pound,” a UK central bank digital currency.
It added that the CBDC would be subject to rigorous privacy and data protection standards.
“It would be privacy-enhancing by design and would allow users to make choices about their data,” the bank stated.
The Bank of England said that it was too early to decide on launching the digital pound but judged it likely that one would be needed in the future.
The retail CBDC would be used by households and businesses for everyday payment needs, the paper noted. Furthermore, it would be used in stores and for online shopping and will be transferable between parties.
The digital pound will exist alongside cash and be interchangeable with it and bank deposits. Furthermore, it would be accessible through smartphones suggesting that the central bank is also developing a digital wallet.
The bank acknowledged that cash payments were in decline, exacerbating its drive for a digital economy. In 2021, card payments accounted for close to 60% of UK payments, and 32% of all payments were contactless, the paper revealed.
However, it is not ready to eliminate cash just yet since it remains popular with many citizens.
“Around 1.2 million UK adults do not have a bank account and around one fifth of people name cash as their preferred payment method.”
More importantly, the paper stipulated that the Bank of England and the government would not see any personal data. This statement should dispel fears that CBDCs are being used by governments as financial surveillance tools.
Unlike in many Asian nations, the digital pound would also be available to non-UK residents, it stated.
However, the UK central bank is vehemently against decentralized cryptocurrencies, so this could be a push to drive people away from them.
According to the Atlantic Council’s CBDC tracker, there are 11 nations that have launched a CBDC, and they are all in the Caribbean, aside from Nigeria. Furthermore, 17 nations are undergoing pilots, and most of them are in Asia.
The UK is still in the development phase of its CBDC rollout along with 33 other countries.
In related news, the Switzerland-based Bank for International Settlements (BIS) announced on Feb. 7 that it will focus heavily on CBDCs in 2023 to improve payment systems.