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In the News

Is the Bank of England set to issue a digital pound?

Geoff Riley

7th February 2023

A truly fascinating headline in the Financial Times today! The UK Treasury and Bank of England are launching a consultation on plans to design a “digital pound” that could supplant banknotes by 2030. It would be a state-backed digital currency that would sit in wallets on smartphones and could be used for shopping much like traditional cash.

More here on the story from BBC news

Both the HM Treasury and the Bank of England want to ensure the public have access to safe money, supporting private sector innovation, choice and efficiency in digital payments. There are plenty of private sector tech giants circling around digital payment systems that might usurp the central bank if they are sluggish in adopting one.

A central bank digital currency (CBDC) is a digital version of a country's national currency that is issued and backed by the central bank. CBDCs aim to provide a secure and convenient alternative to physical cash and traditional bank deposits.

Several central banks around the world are exploring the possibility of issuing CBDCs, and some have even launched pilot programs to test the viability of the technology. However, widespread adoption of CBDCs will likely take time, as central banks must carefully consider the potential impact on financial stability, monetary policy, and privacy before fully launching a digital currency.

Graham's Insight

The inevitable rise of cryptocurrencies seems to be guaranteed if central banks are keen to get in on the act. However, looking to the future, it seems that there's some sort of case for national governments having some form of digital currencies to ensure that they are able to exert some control over at least a portion of the digital economy. However, how the digital pound will ultimately look will be interesting to see.

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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