A digital pound, issued by the Bank of England, is expected to be exchangeable with cash and bank deposits, ensuring the continuity of a trusted, uniform, and accessible means of payment. As a publicly provided platform, it could also foster innovation by enabling a varied range of private sector firms to develop innovative and user-friendly solutions.
According to the official press release, no decision has been made on whether to proceed with a digital pound. After completing the process of designing the phrase over the next couple of years, the Bank and Government are set to assess the policy case for a digital pound and determine whether or not to proceed. At the same time, the legislation would safeguard users’ privacy, while also guaranteeing that neither the Bank nor the Government could access clients’ personal information, nor control the manner in which households and businesses use their money.
More information and public consultation would precede the introduction of primary legislation by the Government. The institutions expect to publish regular future progress updates, which will also be supplemented by design notes on specific topics related to a digital pound.
In line with the NPV, the potential for a digital pound is expected to form part of the Bank’s response to evolving trends in money and payments, as a digital pound, along with the commitment to banknotes, could contribute to keeping money issued by the Bank available and useful in an ever more digital economy, preserving the role of public money as the anchor of the monetary and financial system.
As a public platform for private sector innovation, a digital pound could also promote further choice and efficiency in payments. For example, this process could deliver new ways of receiving and making payments, which will expand access to those who currently don’t have access to digital payments. Those who currently have the needed access to digital payments would also have an alternative that improves choice and delivers resilience through increased diversity in payment options.
In addition, a digital pound could extend access to retail central bank money through the process of supporting and complementing the system of cash and privately issued money. By using its technical and scheme standards, a digital pound will also optimise the process of delivering a safe, reliable, and accessible digital infrastructure for participants, while providing a means for private digital payment companies to ensure interoperability with central bank money as well.
The digital pound design phase will consist of four interconnected workstreams, including experiments and proofs of concept, blueprint, national conversation, and assessment. At the same time, the design phase elaborates on how the end users, intermediaries, and core platform are set to interact in a digital pound, as well as the manner in which these interactions may be governed by the rules of a digital pound scheme and supporting regulatory requirements.
In addition, the institution will also launch the Digital Pound Lab in 2025, as the technology sandbox environment will enable hands-on experimentation, allowing it to test API functionality, optimised use cases, and potential business models for PIPs and ESIPs. The solution will provide a simulated environment to test the potential capabilities of a digital pound, offering critical insights into the feasibility of different use cases, while also helping assess the feasibility of developing a digital pound as a platform for development.
Exploring the digital pound as a public-private platform is expected to benefit the UK payments, fintech and technology community by developing digital pound use cases and solutions, encouraging optimised services, providing knowledge transfer and capacity building, as well as raising the visibility of the overall UK fintech sector.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now