The Bank of England and the U.K. Treasury announced that a digital pound could be used by households and businesses for everyday payments in-store and online later this decade.
The so-called ‘Britcoin’ would be used alongside cash, rather than replacing it, according to officials. And industry analysts say that these plans underscore that digital currencies are the future of finance and strengthen the case for cryptocurrencies such as Bitcoin.
“While cash is here to stay, a digital pound issued and backed by the Bank of England could be a new way to pay that’s trusted, accessible and easy to use,” Chancellor Jeremy Hunt noted.
“That’s why we want to investigate what is possible first, whilst always making sure we protect financial stability,” he added.
The central bank digital currency (CBDC) would use blockchain technology currently used by cryptocurrencies to record transfers on a central digital ledger.
“We and many others have been saying for a long time that digital currencies are an inevitability in the ever more digital world in which we live,” said Nigel Green, CEO and founder of independent financial advisory and fintech deVere Group.
“If tech is increasingly at the core of how we live, work, do business and much more, it’s logical to have money that is also tech-driven too. It seems that this is now a view shared by the UK government.”
Green is confident that as more and more countries introduce their own CBDCs, the case for cryptocurrencies, such as Bitcoin, will grow stronger.
“CBDCs might have many advantages, including convenience, efficiency and transparency, but what they do not offer the user is privacy,” he said.
Greater oversight
“Of course, the government and other CBDC proponents will object to criticisms, saying that they are ‘alarmist’. But it is important to point out that these state-backed, programmable digital currencies will provide governments greater oversight of citizens’ transactions in real-time,” he explained.
Green said that digital currencies, “are going to be a game-changer in the financial system as they will be able to track and trace every purchase and monitor every penny of the money that’s being spent.”
This is why Bitcoin and cryptocurrencies, will become increasingly attractive, he added.
“They still have all the plusses of being digital – speed, efficiency and convenience – but they are fundamentally different as they run on an open, immutable blockchain. They are global, borderless, tamper-proof and censorship-resistant.”
CBDCs are reportedly under development in more than 100 countries.
In the winter of 2022, the Beijing Winter Olympics were used to launch China’s new digital currency.
The digital yuan had already been trialled in various cities across China the year before, but the Games were the first time it was piloted on a global stage with mainly foreign users.
Green concluded that, “we will have a multi-faceted system of currencies moving forwards. The mix will include fiat, CBDCs and crypto.
“Whilst there are pros and cons to all, for many people programmable CBDCs will be unattractive, due to the privacy and government tracking concerns.”
