Digital Pound Legislation will provide protections to Privacy and Control

The UK government has announced that it will introduce legislation to regulate the use of digital pound, a new form of digital currency that will be backed by the Bank of England. The digital pound, also known as Britcoin, will be a complement to cash and bank deposits, and will aim to provide a secure and efficient way of making payments in the digital age.

According to the government, the digital pound legislation will ensure that users have adequate protections for their privacy and control over their money. The legislation will also set clear rules and standards for the providers of digital pound services, such as banks, fintech firms and payment platforms. The government said that it will consult with stakeholders and the public on the design and implementation of the digital pound system.

The government claimed that the digital pound will bring several benefits to the UK economy, such as:

Enhancing financial inclusion and access to digital payments for everyone. Supporting innovation and competition in the financial sector. Reducing costs and risks associated with cash handling and cross-border payments. Strengthening the resilience and stability of the payment system. Supporting the UK’s role as a global leader in fintech and digital finance

The government also said that it will work closely with the Bank of England, which will have the sole authority to issue and destroy digital pounds, as well as to oversee the monetary policy implications of the new currency. The Bank of England has been conducting research and experiments on the feasibility and impact of a central bank digital currency (CBDC) since 2015 and has recently established a CBDC unit to coordinate its work on the topic.

The Bank of England is exploring the possibility of creating a new form of digital money that would be issued by the central bank. This is known as a central bank digital currency (CBDC), and it could have significant implications for the future of money and payments in the UK.

A CBDC would be a new type of money that would exist alongside cash and bank deposits. It would be denominated in pounds sterling and backed by the Bank of England. Unlike cash, which is physical, or bank deposits, which are electronic, a CBDC would be digital and accessible through devices such as smartphones or computers.

The Bank of England has not decided whether to introduce a CBDC or not. It is still conducting research and experiments to understand the benefits, risks and challenges of a CBDC. The Bank is also engaging with stakeholders from the public sector, private sector and civil society to gather their views and feedback on a CBDC.

Some of the potential risks and challenges of a CBDC include:

Disrupting the banking sector by reducing the demand for bank deposits and affecting the profitability and business models of banks. Affecting privacy and data protection by creating new issues around the collection, storage and use of personal information related to CBDC transactions. Introducing operational and cyber risks by requiring a complex and secure technological infrastructure to support a CBDC.

The Bank of England is committed to ensuring that any decision on a CBDC is based on rigorous analysis and evidence. The Bank is also committed to ensuring that any CBDC would be designed in a way that respects the values and expectations of the British people, such as privacy, security and trust.

The UK is not the only country that is exploring the possibility of launching a CBDC. According to a recent survey by the Bank for International Settlements (BIS), 86% of central banks are actively researching CBDCs, 60% are experimenting with them, and 14% are deploying pilot projects. Some of the countries that have already launched or are planning to launch CBDCs include China, Sweden, Bahamas, Japan, South Korea and Nigeria.