Britain’s financial services minister has said that the prospective introduction of a digital pound is still “an if and not a when”.
The UK finance ministry is expected to launch a public consultation on the attributes of a digital pound in the coming weeks.
However, Britain’s financial services minister Andrew Griffith has stressed the importance of getting the currency’s design done right rather than quickly.
“The consultation is going to say this is an if and not a when. We are not fully into the inevitability of doing this,” Griffith told the UK parliament’s Treasury Select Committee.
Over the last few years, China has pushed ahead with piloting a digital yuan and the European Central Bank is studying a digital euro, piling pressure on Britain to do the same and keep abreast of advances in financial technology.
Nonetheless, the use of the digital pound has the potential to raise many public policy issues.
“We have got to get them right. I would rather be right than be first,” Griffith said. “It will be a long lead-time activity.”
In 2020, the Bank of England first stated that it was considering the introduction of an electronic form of central bank money that could be used by households and businesses to make payments, alongside cash and money held in bank accounts.
The first-case use of a digital pound would probably be in the settlement of wholesale financial transactions, Griffith added. However, given public policy considerations for a digital currency, a wholesale, private fiat-backed stablecoin would probably get there first, he said.
This could also reduce friction for international payments and offer an alternative to cash and card payments, while taking advantage of the decline in cash payments accelerated by the coronavirus pandemic; fewer than 10 per cent of payments in the UK are forecast to made with cash by 2028. Authorities have stated that they remain committed to supplying cash to those who prefer to use it.
In addition to the digital pound consultation, Griffith said there will also be a public consultation regarding Britain’s first general regulatory approach to crypto assets, a sector where consumer protection has come under scrutiny in recent weeks.
In Europe, the European Union is also due to publish a draft law this year to legally set up and regulate a digital euro.
In July, the European Commission, EU lawmakers and member states reached an agreement on what has been considered the first major regulatory framework for the cryptocurrency industry, due to receive final approval in the coming weeks and come into effect in 2024.
In comparison, Griffith said the UK rules could be broader to include decentralised finance.
In 2021, the UK banned Binance, one of the world’s largest cryptocurrency exchanges, from operating in the UK, as it lacked regulatory permissions. In June 2022, Scotland Yard said it had seized a record £114m of Bitcoin as part of an investigation into money laundering offences.
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