In response to a February consultation on a digital pound, The Bank of England and UK Treasury have said they remain undecided on the launch of a digital pound.
The BoE and UK Treasury, in the response said it is too early to conclude on whether a digital pound is necessary, even though they intend to continue with research on the subject of a central bank digital currency (CBDC).
“The Bank and HM Treasury judge that further preparatory work is justified to enable us to respond to developments in the payments landscape and to reduce materially the lead time if there is a future decision to introduce a digital pound,” the consultation response said.
The idea of a digital pound has been in consideration for some time now as central banks all over the world are working on the idea of a CBDC, some more advanced than others.
CBDCs are a way to provide fast and efficient payment options to replace public digital currencies such as Bitcoin. This is as cryptocurrencies are becoming rapidly popular and the fear of destabilizing the financial system mounts.
The BoE and UK Treasury further stated that the design phase for the digital pound would persist in exploring the feasibility of the UK having both a retail and a wholesale CBDC. They also stated that a CBDC will not be launched earlier than 2025 even if the government eventually does launch one.
Privacy and Trust Concerns
The BoE and Treasury mentioned some concerns, among which were privacy and trust concerns from the public. There has been a public belief that a CBDC will be used for surveillance, which constitutes a violation of users’ privacy.
The public also doesn’t trust central banks that CBDCs are meant to improve the lives of the people, but rather as a tool for financial control. The two respondents stated that these concerns will be addressed through legislation.
“To address these concerns, the publication confirmed that primary legislation would be introduced before the launch of any digital pound,” the BoE and the Treasury said.
They however stated that neither the BoE nor the UK Treasury would have access to users’ personal data if a retail CBDC was launched.
“Trust in all forms of money is an absolute necessity. We know the decision on whether or not to introduce a digital pound in the UK will be a major one for the future of money. It is essential that we build that trust and have the support of the public and businesses who would be using it if introduced,” Bank of England Deputy Governor for Financial Stability Sarah Breeden said.
Cash Remains King
One major notion about a CBDC is that it is meant to replace cash, making all transactions perfectly traceable by the central bank.
The BoE and UK Treasury also addressed this issue, stating that “central bank money remains available and useful in an ever more digital economy, continuing to support UK monetary and financial stability.”
“Banknotes and coins are important for many people so we will continue to provide them for those who want to use them. You would simply have even more choice when you make payments,” the BoE and Treasury statement added.
More details will emerge as the UK government continues to research the idea of a digital pound.
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