The UK is pacing up its efforts to understand the possible outcomes of rolling out a digital Pound CBDC. On the order of the UK Parliamentary Committee and the House of Commons, the Bank of England and the UK Treasury have analysed the benefits that could entail the launch of this CBDC. The reason is that Britain is trying to avoid excessive expenditure on CBDC pilot and trials. The Bank of England (BoE) has begun its due consideration on CBDC. The lender has roped in MIT to zero down on the pros and cons of CBDCs.
The English CBDC is being scanned to recognise the benefits of issuance, distribution, and privacy of including digital pound as part of their existing financial system.
“We heard evidence that a wholesale CBDC could bring potential benefits for wholesale payments, including by reducing settlement times and counterparty risks. The design for a digital pound proposed by the Bank of England and Treasury is for a ‘platform model’, in which the Bank of England would provide the core public infrastructure and issue digital pounds, which would be recorded in a ‘core ledger’,” the House of Commons Treasury Committee wrote in an official post.
CBDCs are central bank digital currencies that are essentially the digital representation of fiat currencies on blockchain networks. Introducing CBDCs as a mode of digital payments could help nations meet their environmental goals and reduce reliance on paper cash notes. In addition, transactional history recorded for CBDCs would be unalterable that would make record-keeping even more transparent.
As part of the assessment, the Bank of England said CBDCs could reduce higher payments costs faced by smaller merchants. The digital pound could result in market concentration, support financial inclusion, and improve domestic payments resilience as well as cross-border payments.
For now, neither the Bank of England nor the UK Treasury has any concrete timeline about the readiness of the digital pound. The assessment report also noted that the US is also not rushing to establish its CBDC with any urgency.
“While cash is here to stay, a digital pound issued and backed by the Bank of England could be a new way to pay that’s trusted, accessible and easy to use. That’s why we want to investigate what is possible first, whilst always making sure we protect financial stability,” Treasury chief Jeremy Hunt had said in a statement in February this year.
Meanwhile, nations that are ahead into the CBDC game include China, India, Jamaica, and Hong Kong.