Britain joins the digital currency bandwagon

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The United Kingdom’s central bank and treasury have jointly set up a special taskforce to explore the possibility of introducing a central bank digital currency (CBDC) that could exist alongside cash.

Though the official release explicitly states that “the Government and the Bank of England have not yet made a decision on whether to introduce a CBDC in the UK”, it promises to “engage widely with stakeholders on the benefits, risks and practicalities of doing so.”

Making the decision public, Chancellor of the Exchequer, Rishi Sunak briefly posted on his social media account: “Britcoin?”

The taskforce co-chaired by Deputy Governor for Financial Stability at the Bank of England, Jon Cunliffe, and HM Treasury’s Director General of Financial Services, Katharine Braddick is expected to ensure a coordinated and strategic approach among the UK authorities.

The main tasks that this joint group will work on include:

  • Coordinate exploration of the goals, use cases, opportunities and risks of a potential UK CBDC
  • Guide evaluation of the design features a CBDC must display to achieve its goals
  • Support a rigorous, coherent and comprehensive assessment of the overall case for a UK CBDC
  • Monitor international CBDC developments to ensure the UK remains at the forefront of global innovation

The UK is the latest major economy to indicate its interest in building a digital alternative to cash, but within the overall supervision of the existing monetary authorities.

China is at the vanguard of the movement towards digital currencies. It has been conducting trials of its digital yuan or as it is somewhat awkwardly known as digital currency electronic payment (DC/EP) since April 2020.

According to agency reports, the digital yuan is being tested in the retail space across cities such as Beijing, Shanghai, Chengdu and others. Banks associated with Alipay and WePay – gateways that funnel the majority of digital transactions in China – are included in these domestic trials.

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