The UK is investigating the feasibility of a digital currency based on the pound

The UK is investigating the feasibility of a digital currency based on the pound

The U.K. As part of its plan to regulate the cryptocurrency industry, it will hold public consultations about creating a central bank digital currency (CBDC) in the coming weeks.

In the United Kingdom, they may soon introduce a digital pound as a part of the country's larger initiative to regulate the cryptocurrency sector more effectively.

The UK government will investigate the possibility of establishing a central bank digital currency, Chancellor of the Exchequer Jeremy Hunt said.

When it comes to new forms of money like cryptocurrencies and digital assets, Hunt has said that the United Kingdom's regulatory framework “must support innovation and leadership.”

"To ensure the sector is prepared to embrace and facilitate the adoption of cutting-edge technologies, the government is bringing forward a consultation in the coming weeks to explore the case for a central bank digital currency — a sovereign digital pound — and consult on a potential design."
Chancellor of the Exchequer Jeremy Hunt
Chancellor of the Exchequer Jeremy Hunt

Moreover, Hunt mentioned that the Bank of England would publish a “Technology Working Paper” detailing the technical factors to be considered and the construction of the digital pound.

The government will work to create a secure regulatory environment for stablecoins as it investigates the feasibility of a digital pound.

According to Hunt, the government should ensure it has the right powers to bring more crypto assets activities to the country because stablecoins “may be used for payments.”

Additionally, the government will amend the Financial Services and Markets Bill to include cryptocurrency trading by registered investment advisors.

This will allow foreign funds managed in the United Kingdom to incorporate a variety of cryptocurrencies into their holdings. According to Hunt's statement, the new policy will go into effect by the year's end.

By making this statement, the Bank of England has showed its commitment to the concept of a central bank digital currency.

Jon Cunliffe, the Deputy Governor of the Bank of England, is just one of many BoE officials who have spoken out in favor of a fully digital version of the British pound.

CBDC advocates say that a digital pound could provide businesses and consumers with a form of cash backed by the central bank that could be used exclusively in digital transactions.

The Bank of England
The Bank of England

The Bank of England claimed that because of the dramatic decline in cash transactions, “private companies” now hold most monetary resources, rendering them unprotected by the “government guarantee carried by banknotes and coins.”

Despite this widespread support for a CBDC, there is a vocal minority in the United Kingdom that is opposed to the idea. There is a British parliamentary committee called the Economic Affairs Committee.

A panel of legislators has been voicing opposition to a CBDC because it threatens national security and individual safety.

There is no compelling argument, the Committee concluded in a report released in January 2022.

While the report found some benefits to a central bank digital currency, it ultimately concluded that it could pose serious threats to financial stability and users' privacy.

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