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The consultation paper for Digital Pound notes that the e-GBP will be launched in public-private partnership to boost retail adoption.
On Tuesday, February 7, the Bank of England and the UK Treasury unveiled the consultation paper for their central bank digital currency (CBDC) aka Digital Pound. The BoE and UK Treasury also released a technology working paper while delving into the economic and technology design considerations.
Bank of England and Its Plans for CBDC
The BoE noted that the e-GBP would be retail-focused and could form part of the “mixed-payments economy” while existing along with other crypto market stablecoins. In its consultation paper, the Bank of England (BoE) added:
“In much the same way that cash exists alongside private money, the digital pound does not need to be a dominant form of money in order to meet its public policy objectives. The digital pound could exist alongside other forms of money, including stablecoins.”
Bank of England governor Andrew Bailey said that BoE will evaluate several different implications for the technical work around the launch of CBDC. All the work that the central bank does on e-GBP will serve as the foundation for the country’s path of moving towards the adoption of CBDC.
Currently, there’s no decision over the timeline of the launch of e-GBP, however, this central bank digital currency (CBDC) could arrive by the end of the year. This would also prevent the fragmentation of the electronic cash system dominated by tech and banking giants. Speaking to Reuters, UK Chancellor Jeremy Hunt explained:
“While cash is here to stay, a digital pound issued and backed by the Bank of England could be a new way to pay that’s trusted, accessible and easy to use. That’s why we want to investigate what is possible first, whilst always making sure we protect financial stability.”
The Public-Private Partnerships for CBDC
The consultation paper explained that the primary motivator behind launching a digital pound is to ensure that UK central bank money remains “an anchor for confidence and safety” in the country’s monetary system and to “promote innovation, choice, and efficiency in domestic payments.”
As a result, they plan to push the retail adoption of e-GBP through public-private partnerships. “For the digital pound to play the role that cash plays in anchoring the monetary system, it needs to be usable and sufficiently adopted by households and businesses.”
As per the plan, users could connect e-GBP to private sector-run APIs which in turn connect to the core ledger. The programmability features include smart contracts and atomic swaps which allow the assets to move across the sector.
In addition to helping build the infrastructure for e-GBP, the private sector would consider imposing individual limits between 10,000 to 20,000 British pounds. The paper notes: “A limit on individual holdings would be intended to manage those risks by constraining the degree to which deposits could flow out of the banking system. That is important during the introductory period as we learn about the impact of the digital pound on the economy.”
Furthermore, the paper also noted that the Digital Pound will be subject to high standards of privacy and data protection.