UK Lays the Ground for a Digital Pound
Home > Finance & Fintech > Article

UK Lays the Ground for a Digital Pound

Photo by:   Unsplash
Share it!
Antonio Gozain By Antonio Gozain | Senior Journalist and Industry Analyst - Tue, 01/10/2023 - 15:33

While the EU, China and other countries are working to create Central Bank Digital Currencies (CDBCs), the UK is focusing on the design and regulation of a digital pound with no rush, as getting it right is a bigger priority than a rapid launch, according to UK’s Financial Services Minister Andrew Griffith.

The Finance Ministry will launch a public consultation on the attributes of creating a digital pound in the following weeks. China is currently working in the pilot of a digital yuan and the European Central Bank is studying a digital euro, pressuring the UK to do the same and keep the pace of advances in financial technology.

"The consultation is going to say this is an if and not a when. We are not fully into the inevitability of doing this," Griffith told the UK parliament's Treasury Select Committee, as reported by Reuters. A digital pound raises many public policy issues, he added.

A digital euro, for example, “would be a central bank digital currency, an electronic equivalent to cash,” according to the EU. CDBCs would complement banknotes and coins, giving people an additional choice to pay. In underbanked countries, such as Mexico, they would also provide the possibility to do digital transactions to people that do not have a bank account.

The EU is due to publish in 2023 a draft law to legally set up and regulate a digital euro. While the region is still investigating the pros and cons of a digital euro, it says that the currency would be accessible, robust, safe, efficient and compliant with the law. 

In the UK, the creation of a digital pound would raise many public policy issues, according to Griffith: “We have got to get them right. I would rather be right than be first. It will be a long lead-time activity.” In addition, the first case use of a digital pound would probably be in the settlement of wholesale financial transactions, he said.

In Mexico, the creation of a digital peso has been promoted by the Peso Digital organization since 2014, following the Bank of Mexico’s (BANXICO) first publication regarding cryptocurrencies. 

More recently, two members of BANXICO’s Governing Board have spoken in favor of CDBCs. In 2022, during an interview with Bloomberg, Deputy Governor Jonathan Heath explained that the digital peso would work as an ideal alternative to cash: “The idea is that anyone could make a digital transaction, even if they do not have a bank account,” he said.

In September 2022, BANXICO Deputy Governor Galia Borja spoke in favor of CDBCs in a presentation during a finance forum in Puebla. “Digital innovation has led to technological developments covering new needs in the economy and society. Central banks must work in tune with technological advances to meet these new demands,” said Borja.

Photo by:   Unsplash

You May Like

Most popular

Newsletter