The Bank of England (BoE) has made extensive research on the best format for developing a digital pound to supplement the fiat system.
The Bank of England (BoE) is working on re-establishing the pound as the preferred global reserve currency through a Central Bank Digital Currency (CBDC). The rise of the digital economy post-Covid-19 global pandemic through the cryptocurrency market has most governments thinking about moving to decentralized ledger technologies (DLTs). Moreover, the use of the digital economy is not only sustainable but also scalable to international markets. Consequently, the forex market will significantly benefit from fast verifiable digital currencies and so will the cryptocurrency market.
BoE on Digital Pound Key Selling Features
Over the last few years, the Bank of England has collaborated with different entities in the research of an excellent Central Bank Digital Currency. For instance, in February 2022, the Bank of England and the Massachusetts Institute of Technology (MIT) agreed to collaborate on a twelve-month research project on CBDC. The Bank of England has also conducted several consultations with the public on how to develop and roll out the CBDC.
As a result, the BoE noted that the digital sterling or more popularly called the Britcoin will primarily focus on user privacy. According to Tom Mutton, director of fintech at the Bank of England, the bank may look to other technologies beyond blockchain in developing its CBDC. However, Mutton noted that the Bank will give user data security huge attention in order to ensure the government does not become a tracking agent for the users.
“There will be no data shared with the Bank of England, we will know what transactions have happened but we will have no data on the individual who did it. While the wallet provider would have the user data but won’t have access to their transaction data,” Mutton noted.
Reportedly, the Bank of England is comparing the efficiency of using blockchain technology over traditional conventional ledgers in developing the CBDC that is compatible with the private sector.
“We want to be compatible with distributed-ledger business models in the private sector, but we were not convinced that distributed ledgers offered more efficiency over conventional ledgers,” he added.
Currently, the Bank of England and the Treasury Department are waiting for feedback from the stakeholders which is open until June 30.
Market Outlook
The Bank of England is racing against time to avoid losing its aesthetic attraction to other global currencies like the Chinese Yuan that have already rolled out in the digital format. The launch of the digital pound comes amid a high-interest rate of about 5 percent despite the Bank of England’s Monetary Policy Committee (MPC) trying to bring down inflation to 2 percent.
With the UK operating freely from the shackles of the European Union, its future economic growth prospects are pegged to the relationship the country signs post-Brexit.
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