The Bank of England and the UK Treasury announced that a working group will be established to explore the possibility of a central bank digital currency. The goal is to explore the risks and opportunities of creating a new type of digital money – Reported by the BBC.
The planned central bank digital currency will be used mainly by households and companies, and cash and bank deposits will remain in circulation. No government decision has been made to bring in these funds, and the process is now in the planning stage.
However, the government and the Bank of England intend to “engage with a wide range of stakeholders” on the benefits and practicalities of doing so.
The task force will be co-chaired by Sir John Cunliffe, Deputy Governor for Financial Stability at the Bank of England, and Catherine Braddick, General Manager of Financial Services at the Treasury.
The Bank of England representative previously said that the financial institution is committed to the idea of digital currency because we are “living through a period of great change in money and salaries”.
The use of cash in financial transactions has decreased steadily in recent years, while debit card payments have been increasing. The use of credit and debit cards is also increasing.
The Bank of England would also find it beneficial to have its own digital money, as this would eliminate the risks of creating new types of private money, including cryptocurrencies like Bitcoin.“Digital money is sometimes seen as the equivalent of digital banknotes, although in some ways it may have in common with a bank deposit.”
Although the Bank of England has been commenting on its own plan for its digital money for years, the Treasury Department has now seen the time to scrutinize its provision to households and businesses.
This would basically be a digital version of the British pound, which could correct flaws in the financial system. It will not be a Bitcoin speculative instrument whose value is constantly fluctuating.
The revolutionary idea behind the plan is that by using this digital money, ordinary citizens can establish a direct relationship with the central bank. This can provide simple and straightforward tools to stimulate the economy and even apply negative interest rates. The central bank is expected to be able to track when and where an electronic money transaction is made.
Another argument in favor of creating digital money for the central bank is that this would allow the country to remain at the forefront of financial innovation.
Most of the world’s central banks are already involved in developing their sovereign digital money. And in China, the digital yuan is already undergoing general testing.