The Bank of England and the Treasury have announced that they are setting up a taskforce to explore the possibility of a central bank digital currency.
Rishi Sunak, the chancellor, has asked the Bank of England to look at the case for a new “Britcoin”, aimed at tackling some of the challenges posed by cryptocurrencies such as bitcoin.
A Bank-backed digital version of sterling would potentially allow businesses and consumers to hold accounts directly with the central bank and to sidestep others when making payments, changing the lenders’ role in the financial system.
“We’re launching a new taskforce between the Treasury and the Bank of England to co-ordinate exploratory work on a potential central bank digital currency [CBDC],” the chancellor told an audience of financial executives today at the start of the UK FinTech Week conference
Shortly after speaking, Sunak tweeted the single word “Britcoin” in reply to the announcement of the taskforce.
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Other central banks are also looking at whether to set up digital versions of their own currencies, essentially widening access to central bank funds which only commercial banks can use at present. This could speed up domestic and foreign payments and reduce financial stability risks.
China is a front-runner to launch a central bank digital currency. Last week the European Central Bank said it was studying an electronic form of cash to complement banknotes and coins but any launch was still several years away.
The Bank said a digital version of sterling would not replace either physical cash or existing bank accounts.
It added: “The government and the Bank of England have not yet made a decision on whether to introduce a CBDC in the UK, and will engage widely with stakeholders on the benefits, risks and practicalities of doing so.”
The central bank also said that if a CBDC were to be introduced, it would be denominated in pounds sterling, just like banknotes, so £10 of CBDC would always be worth the same as a £10 note.
