The U.K. initiated the consultation period for its digital pound today and said that the asset will not be a cryptocurrency, as seen in a Feb. 7 statement.
Jeremy Hunt, Chancellor of the Exchequer, said:
“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 why we want to investigate what is possible first, whilst always making sure we protect financial stability.”
Any future digital pound would be meant for use in personal and business transactions. It would be interchangeable with cash and bank deposits.
The U.K. government noted that a digital pound would be a central bank digital currency (CBDC). It distinguished CBDCs from cryptocurrencies and stablecoins, noting that any digital pound would be issued by the Bank of England rather than the private sector. It also said that a digital pound would match the price of GBP and avoid the price volatility of unbacked cryptocurrencies such as Bitcoin.
The government additionally noted that a digital pound would be offered alongside a digital wallet — although it said the user experience would be similar to a contactless payment app as opposed to a cryptocurrency wallet.
HM Treasury and the Bank of England said in an attached consultation paper that the digital pound’s core ledger could be built on a traditional centralized database, or on a blockchain or distributed ledger technology (DLT). The project’s design is “agnostic” in this regard, according to the text of the paper.
The agencies also said that a digital pound is “likely to be needed in the future,” but clarified that no decision has been made on whether to introduce such an asset.
The agencies responsible for the asset are now seeking input from businesses, charity groups, payments companies, and the general public. The consultation period will remain open until June 7 and will lead into a design stage.