UK Central Bank Digital Currency Plans Take a Backseat
The Bank of England has announced that it will not make a decision on introducing a central bank digital currency (CBDC) for the general public for at least two years. This marks a significant delay in the project’s timeline, which was initially championed by former Prime Minister Rishi Sunak in 2021.
A Cautious Approach
The BoE and the current government have taken a more measured approach to the idea of a digital currency, citing widespread privacy concerns raised during a public consultation. Governor Andrew Bailey has expressed reservations about the need for a CBDC, suggesting that it may only be necessary if British banks fail to improve their payment systems to compete with those offered by tech companies.
Design Phase Underway
The BoE has begun working with the UK’s finance ministry to develop a potential design for a digital currency, building on plans outlined in a previous consultation. This design phase is expected to take around two years, during which time the Bank and government will assess the policy case for a digital pound and decide whether to proceed.
Balancing Privacy and Security
A digital pound would be designed to be private but not anonymous, allowing authorities to track transactions suspected of involving money laundering or terrorist financing. However, the BoE has assured users that their personal information would be safeguarded, and neither the Bank nor the government would have access to it or control over how households and businesses use their money.
Next Steps
The BoE’s announcement comes after it stated in January 2024 that a decision on the digital currency would not be made before 2025 at the earliest. As the design phase gets underway, the Bank and government will continue to monitor developments in the payments landscape, weighing the potential benefits and risks of introducing a CBDC.
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