The UK government is considering introducing a “digital pound”, a new form of currency that would be designed for use by households and businesses, according to Andrew Griffith, the economic secretary to the Treasury. The digital pound would sit alongside cash and bank deposits, rather than replacing them. A public consultation on the attributes of a digital pound would be launched in coming weeks, Mr Griffith said.
The move is part of the UK government’s plan to become a world leader in the crypto and fintech sectors. Central banks around the world are developing or exploring digital currencies, with China being a front-runner in this global race, and currently in the process of testing a digital yuan in major cities including Beijing, Shanghai and Shenzhen. The European Central Bank also took a first step towards launching a digital version of the euro in July 2021, kicking off a 24-month investigation phase to be followed by three years of implementation.
Mr. Griffith told the Treasury Select Committee that the government was “a long way down the road… to establish a regime for the wholesale use, for payment purposes, of stablecoins”. Stablecoins are designed to have a predictable value linked to traditional currencies or assets such as gold. The introduction of a digital pound would be a “potentially disruptive game-changing technology that can challenge but also turbocharge all of those [financial] industries”, he said.
The move also comes with concerns about the stability of cryptocurrencies, particularly after the recent “crypto winter”, a rapid decline in the value of Bitcoin and other assets. The government also plans to launch a public consultation on Britain’s first general regulatory approach to crypto assets, a sector where consumer protection has come under scrutiny in recent weeks.
The EU has set out the world’s first comprehensive set of rules for regulating crypto markets, which are due to receive final approval in the coming weeks and come into effect in 2024. Mr. Griffith said the UK rules could be broader, to include decentralized finance, and everyone would benefit from greater transparency. The Bank of England and the government will develop the plans over the following few years and will hold “at least” six roundtables with those in the crypto industry, to “expose us as regulators and decision makers”.