Is a Digital Pound the Future of Payments in the UK?

The Bank of England’s Deputy Governor for financial stability, Sir Jon Cunliffe, has claimed that a central bank digital currency (CBDC) in the UK is “likely to be needed.” During a Treasury select committee hearing, Cunliffe stated that the Bank of England currently does not have the technical skills to create a CBDC, but he “hoped” to develop them in the next phase. The Deputy Governor also compared the potential impact of a digital pound to the launch of the iPhone, offering a “new frontier” in payments compared to the App Store’s launch.

Some concerns about how a CBDC would reduce fraud and the potential limits on individual freedom have been raised. For example, Danny Kruger MP has warned that a CBDC will allow the bank to “peer into people’s transactions,” The currency’s programmability may “influence or coerce” individuals into making certain payments.

However, despite the concerns, a CBDC could improve financial security and create new opportunities for innovation in payments. The UK need not wait until it’s “9 out of 10” for a digital pound to become necessary, and the development of CBDC technology could take years.

Related Facts

• The Bank of England is not the only central bank to consider a CBDC; over 60% of banks surveyed by the Bank for International Settlements were engaged in some form of CBDC development.
• China has already launched a digital version of its national currency, the digital yuan, in several pilot programs.

Key Takeaway

A digital pound could offer a “new frontier” in payments compared to the App Store’s launch, potentially improving financial security and creating new opportunities for innovation in payments. However, concerns about privacy and individual freedom need to be addressed.

Conclusion

While a CBDC in the UK is not certain, the Bank of England’s Deputy Governor has suggested it is more likely. The development of CBDC technology could take years, but it could offer significant benefits for financial security and innovation. Whether a digital pound becomes a reality or not, the discussion around CBDCs raises important questions about the future of payments and the role of central banks.