Britain has become the latest country to join the digital currency trend. British authorities announced Monday they are exploring the possibility of creating a new digital currency that Treasury chief Rishi Sunak touted as “Britcoin.”
“We’re launching a new taskforce between the Treasury and the Bank of England to coordinate exploratory work on a potential central bank digital currency,” Sunak said at a fintech industry conference on Monday.
The Bank of England and the Treasury said Monday that they will work together to assess the benefits of a central bank digital currency, that will be used by households and businesses, and exists alongside cash and bank deposits, rather than replacing them. It is all coming at a time when cash payments are generally on the decline, partly as a result of the coronavirus pandemic.
The authorities are yet to decide whether to introduce a digital version of the British pound. London said it would explore the objectives, use cases, opportunities and risks, involved before making the move. The Bank of England will also set up a unit within the institution dedicated to exploring a central bank digital currency.
The rise of cryptocurrency has inspired the move by many countries to create digital currencies, offering digital alternative to their fiat.
Digital currencies are being explored or even implemented in several countries now. China leads the way with digital yuan, while Japan has moved way into its own experiment. The European Union, Sweden and the United States have all expressed interest in creating digital currencies.
“The world is going the way of digital currencies and we have to find a place for them in the mainstream,” said Anne Boden, founder and chief executive of app-based Starling Bank.
Another factor driving Central Banks’ Digital Currencies (CBDCs) push is private stablecoin projects like Diem Association backed by Facebook and the token known as tether. To avoid the common cryptocurrency volatility, these coins have been pegged to some external reference such as the US dollar.
One of the benefits of a digital currency would be as a backup to card payments as cash payments continue to decline. It is expected that by the end of this decade, only one in 10 payments in the U.K. are to be made with traditional paper money. Proponents of digital currencies also think they can provide another way for people to make purchases online.
Currently, only the Bahamas has such a currency, but China is likely going to launch the digital yuan soon as its trials continue in several cities. Sweden has indicated it could have its own digital currency by 2026, while the European Central Bank has indicated an electronic euro might be created within four years.
The new British task force is part of a series of measures that Treasury chief Sunak hopes will help the U.K.’s financial technology sector.
“Our vision is for a more open, greener, and more technologically advanced financial services sector,” he told a fintech conference. “And if we can capture the extraordinary potential of technology, we’ll cement the U .K.’s position as the world’s preeminent financial center.”
The Bank of England said the Taskforce will be co-chaired by Deputy Governor for Financial Stability, Jon Cunliffe, and HM Treasury’s Director General of Financial Services, Katherine Braddick. The aim is to work with newly created forums and units to develop synergy with other UK and international authorities, and also engage stakeholders and gather input on all technology aspects of CBDC from a diverse cross-section of expertise and perspective.