The Bank of England and the Treasury have issued a joint statement about the possible set up of a central bank digital currency (CBDC) in the UK. We 'coined the term', excuse the pun, Britcoin.
A taskforce will be led by Sir Jon Cunliffe, the Bank's Deputy Governor for Financial Stability and Katharine Braddick, the Treasury’s Director General of Financial Services to explore the risks and opportunities involved in creating a new kind of digital money.
The digital money will be issued by the Bank for use by households and businesses, it would not replace cash or bank deposits but run alongside them.
The Government and the Bank want to engage mostly with stakeholders on the benefits and practicalities of doing so, although no decision has been taken on whether to have such currency in the UK.
Financial transactions involving cash has been steadily declining, whilst debit and credit card transactions have increased, the Bank previously said, “this is a period of significant changes in money and payments, hence our interest in a CBDC”.
The Bank wants to have its own digital currency to avoid the risks of new forms of private money creation like Bitcoin and should a CBDC be introduced it would in pounds sterling like banknotes, so £10 would be £10 of CBDC and run alongside cash and bank deposits and not replace them.
Central banks across the world are looking into creating such a currency, the only one in existence and undergoing public testing is China’s digital yuan.
Whilst no timetable for the taskforce operation has been announced, the Bank is looking at creating a CDBC engagement forum, a technology forum and a CBDC unit within the Bank itself, which would be overseen by Sir Jon Cunliffe.
If you have not worked this out already, sterling is already a digital currency. Since moving away from the Gold Standard in 1931 after speculators pushed the pound to new lows in the Great Recession. Do you really think the Bank of England has enough bags of 5 pounds, 10 pounds or 20 pounds in weight of 'sterlings' (little silver saxon coins), to give to every person in the UK with a sterling bank note if we walked through their doors with our note and presented it to the Bank of England and demanded they honour: "I promise to pay the bearer on demand the sum of twenty pounds"?
Sterling is already a digital currency as is the dollar, euro, yen and yuan. Britcoin is more about wrestling control from Bitcoin and Ethereum. If central banks and governments have control over cyrptocurrency then money 'supply' is back in their control and of course, will make it ever more difficult for fraudsters and money launderers.