Treasury and BoE say digital pound will be necessary

The paper states a digital pound would be issued by the Bank of England and could be used by households and businesses for everyday payments in-store and online.

If introduced, a digital pound would be interchangeable with cash and bank deposits, complementing cash.

The Bank of England will now take forward further research and development work and the public is being invited to give their views on the scheme to be taken forward.

The consultation is being launched because both HM Treasury and the Bank of England want to ensure the public has access to safe money that is convenient to use as our everyday lives become more digital while supporting private sector innovation, choice, and efficiency in digital payments.

Governor of the Bank of England, Andrew Bailey, said the case for a digital pound in the future continues to grow.

“A digital pound would provide a new way to pay, help businesses, maintain trust in money and better protect financial stability,” he said.

“However, there are a number of implications which our technical work will need to carefully consider. This consultation and the further work the Bank will now do will be the foundation for what would be a profound decision for the country on the way we use money.”

Mr Bailer said a digital pound would replicate the role of cash in a digital world and £10 of a digital pound would always be worth the same as £10 of cash.

It would be issued by the Bank of England, widely available and convenient to use and subject to rigorous standards of privacy and data protection — neither government nor the Bank of England would have access to personal data and holders would have the same level of privacy as a bank account.

A digital pound would be accessed through digital wallets offered to consumers by the private sector through smartphones or smart cards and is intended for payments, online, in-store, and to friends and family, rather than savings, with no interest paid on holdings.

However, there would be initial restrictions on how much an individual or business could hold.

“Unlike cryptoassets and stablecoins, the digital pound would be issued by the Bank of England and not the private sector. We are separately already legislating to protect Access to Cash,” Mr Bailey said.

“This means that it will have intrinsic value and not be volatile, unlike unbacked cryptoassets as there would be a central authority to back it.

“The needs of vulnerable people are being considered in the digital pound design process ensuring that it would be simple and straightforward to use and understood and trusted by the public as a form of money.”

A decision about whether to implement a digital pound will be taken around the middle of the decade and will largely be based on future developments in money and payments. The earliest stage at which the digital pound could be launched would be the second half of the decade.