UK takes another step towards crypto regulation with ‘Britcoin’ proposal
- The UK has moved one step closer to launching a CBDC with a consultation paper outlining the proposed digital pound.
- The Central Bank and Treasury hope to launch a digital pound by 2025.
After 6 February’s announcement about crypto firms, the United Kingdom moved another step closer to launching a Central Bank Digital Currency (CBDC). On that note, there has been a consultation paper outlining the proposed digital pound, dubbed “Britcoin” by the public.
The consultation paper was released on 7 February, in conjunction with the Bank of England (BoE) and the United Kingdom Treasury. A working paper delving into technical and economical design considerations was also released.
The paper claims that despite the recent rise of privately issued stablecoins, CBDCs such as the digital pound can co-exist in what they predict will be a mixed payments economy.
How will the digital pound work in UK?
In the same way that cash coexists with private money, the digital pound does not need to be the dominant form of money in order to meet its goals. The digital pound could coexist with other forms of money, such as stablecoins.
Though the Central Bank and the Treasury hope to launch a digital pound by 2025 at the very least. However, they did say:
“The Bank and HM Treasury consider a digital pound is likely to be needed in the UK though no decision to introduce one can be taken at this stage.”
The primary motivation for launching the digital pound, the paper states, is to ensure that UK’s Central Bank money remains an anchor for confidence and safety in the country’s monetary system. To accomplish this, the e-GBP must be widely adopted in the retail ecosystem through a series of public-private partnerships.
While the paper states that the private sector would contribute to the construction of such infrastructure, it also discusses the need to enforce individual limits ranging from 10,000 to 20,000 British pounds ($12,000 to $24,000) to effectively prohibit its use as a savings account.
However, the paper stated that an e-GBP could impact the business models of commercialized banks due to bank disintermediation, which occurs when fewer deposits are made into commercial banks. The Central Bank also believes that the digital pound will increase financial inclusion among the British public.