The central bank wants e-GBP to be retail-focused and part of a “mixed payments ecosystem” with stablecoins.
After issuing a consultation document on the digital pound, dubbed “Bitcoin,” the U.K. moves closer to creating a central bank digital currency (CBDC).
The BoE and Treasury issued the 116-page consultation paper on Feb. 7. a technical working paper included technical and economical design factors.
The report concluded that in a “mixed payments economy,” CBDCs like the digital pound may co-exist with privately produced stablecoins.
“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.”
The BoE and Treasury plan to introduce a digital pound by 2025 “at the earliest,” but they’re not sure it will.
“The Bank and H.M. Treasury feel a digital pound is likely to be needed in the U.K., yet no decision to adopt one can be taken at this stage,” the report read.
The report stated that the digital pound was created to keep U.K. central bank money “an anchor for confidence and safety” and “encourage innovation, choice, and efficiency in domestic payments.”
Through “public-private partnerships,” the retail environment would need to embrace the e-GBP.
“Households and businesses must utilize and embrace the digital pound for it to underpin the monetary system like cash.”
E-GBP will be accessible via a private sector API that links to the leading ledger.
Smart contracts and atomic swaps will be enabled.
The document claims that the private sector would assist in creating such infrastructure, but it also proposes limiting individual accounts to 10,000 to 20,000 British pounds ($12,000 to $24,000) to deter savings:
“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.”
Crypto community privacy issues were also addressed. The document said an e-GBP would include “rigorous” privacy and data protection measures.
Since core ledger transactions are anonymous, users would “enjoy at least some amount of privacy,” it said.
However, “bank disintermediation” from an e-GBP might affect commercial banks’ economic models by reducing deposits.
The digital pound may effect monetary stability but not money creation. “Bank disintermediation may impact monetary policy transmission to the actual economy,” the consultation document noted.
The central bank believes the digital pound might increase financial inclusion in the U.K.
