Digital Libra “Britcoin” could arrive in the second half of the decade

The UK is moving forward with plans to create a digital pound issued by the Bank of England that would offer a stable alternative to bitcoin or ether.

The UK’s central bank and Treasury said on Monday that an official digital currency “is likely to be needed in the future”.

“While cash is here to stay, a digital pound issued and supported by the Bank of England could be a new way of paying that is reliable, affordable and easy to use,” UK Chancellor of the Exchequer Jeremy Hunt said in a statement.

“That’s why we want to investigate what’s possible first, always ensuring that financial stability is protected.”

The Bank of England and Treasury said the decision on launching a digital pound, which was dubbed “Britcoin”, would be taken in the second half of the decade.

Central banks around the world are considering issuing digital currencies as more parts of the economy move online.

Unlike currently available cryptocurrencies, these coins would be officially backed, which would result in a stable value and mean they could be used for everyday spending.

In the UK, 10 digital pounds would be worth 10 pounds in cash. The Bank of England would provide the key public infrastructure – or a “main ledger” – while private companies would issue digital wallets that could be accessed via smartphones or smartcards.

Central bank digital currencies can make online spending more convenient, facilitate cross-border transactions and increase competition among providers of digital financial assets.

In a speech in November, Sir Jon Cunliffe, the Bank of England’s Deputy Governor for Financial Stability, said that without a digital libra, a few big players could “dominate and perhaps control innovation in payment services”.

But the main details of digital currencies still need to be discussed.

Critics worry that its launch by central banks could cause huge disruption if people rush to exchange cash for a digital alternative.

Another fear is privacy, as digital currencies would give governments new insights into how people are spending their money.

The Bank of England and the UK Treasury said a limit on ownership of a digital pound “would apply at least in the introductory phase” and that the new currency “would be subject to strict privacy and data protection standards”.

Still, they recognized that its use would not be anonymous, given the need to protect against financial crime and maintain public trust.

More than 100 countries have explored the idea of ​​central bank-issued digital currencies, according to the Atlantic Council.

Sweden has been working with Accenture on an e-krona, while Ghana is piloting an e-cedi and Indonesia is developing a prototype for a digital rupee. Eleven countries, including the Bahamas and Jamaica, have already launched central bank digital currencies.

Efforts among larger economies are also accelerating. China is at the forefront, with more than 260 million people already using the digital yuan as part of a pilot program in the country.

In November, major global banks began a 12-week pilot testing digital US dollar transfers with the Federal Reserve Bank of New York. The European Central Bank, meanwhile, is expected to end its investigation into a digital euro this year.

These projects do not seem to be affected by the recent collapse of the main crypto exchange FTX nor by large swings in cryptocurrency prices over the past year.

Bitcoin has seen its value plummet 64% in 2022. It is up around 38% year-to-date as investors show greater willingness to park their money in risky assets.