By Samuel Indyk
Investing.com – UK Chancellor Rishi Sunak has responded to an article in the Daily Mail, denying that any central bank digital currency (CBDC) could directly replace cash.
“We want to make sure the UK is at the cutting edge of innovation and technology in financial services, so it’s right that we explore the potential role of CBDCs to understand the wide-ranging opportunities and challenges they could bring,” Sunak said in a post on LinkedIn.
“A CBDC would, potentially, be a new form of digital money issued by the Bank of England and for use by households and businesses.”
Britcoin
A Treasury taskforce to explore a UK CBDC, dubbed ‘Britcoin’ by some in the UK media, was launched in the Spring alongside the Bank of England.
“There are a number of important considerations relating to the introduction of a CBDC which the Government and the Bank of England will need to evaluate carefully,” Sunak added.
“We will need also to engage widely with stakeholders on the benefits, risks and practicalities. We have not yet made a decision on whether to introduce a CBDC in the UK.”
Sunak has also clarified that any introduction of a CBDC would not mean the end of cash.
“Any potential UK CBDC would exist as a complement to cash and bank deposits, and not a replacement,” Sunak explained.
Other countries
China appears to be the country with the most advanced CBDC, although no countries have widely rolled out digital currencies yet.
An official timetable for the full launch of China’s digital yuan has not been announced but trials have taken place in four different cities and around CNY 200 million of digital currency has been distributed as part of the pilot.
In Europe, Sweden is the furthest down the line with its e-Krona. The Riksbank began evaluating the need for a digital currency as far back as 2017. Last year, the Riksbank began to test its e-Krona pilot, together with Accenture (NYSE:ACN), to construct a possible technical platform for the e-Krona.
This year, Sweden will start work preparing for a possible procurement of an issuable e-Krona.
Benefits of CBDCs
Those who support the introduction of CBDCs say it would help in financial crises, allowing the Bank of England to pay people directly into their accounts if they introduced a stimulus programme, for example.
In theory, it could also lower banking costs for smaller firms and make it easier and cheaper to move money around the financial system.