The UK’s central bank launched its digital pound project

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The long-awaited digital pound initiative was introduced by the Bank of England, the UK’s central bank, with the promise of developing a new payment system and currency.

A consultation document released on Tuesday stated that the prospective digital currency would only be issued by the central bank and that individuals and organizations would be able to store it in a digital wallet that was accessible via cards or cellphones.

The project’s announcement, which builds on Prime Minister Rishi Sunak’s desire to position the nation as a hub for fintech and cryptocurrency, comes a week after the UK government introduced a new legal framework for licensing crypto service providers. Even so, despite the fact that the EU has not yet committed to a deployment, the UK lags behind its Euro zone neighbors where work on a central bank digital currency is already under way.

In October, a definitive decision regarding whether to proceed with the introduction of a digital euro is anticipated. The financial industry will be difficult to persuade that a new payment alternative is necessary.

A digital pound, according to Deputy Bank of England Governor Jon Cunliffe, “may complement and promote new forms of private digital money and payment services” and help reduce the transaction fees that credit card companies and other payment processors demand. He also mentioned the expensive international money transfers, which new digital currencies may make cheaper.

The plan calls for anonymizing wallets on the central bank’s ledger in order to allay privacy worries, and it also calls for making the digital currency non-programmable so that authorities cannot regulate how people spend their money. To reduce the risk of deposits leaving the banking system, the Bank of England also suggests a £20,000 initial cap on the total amount that any one person may retain.

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