The UK Is Exploring a Central Bank Digital Currency
The UK’s announcement is exploring a central bank digital currency (CBDC) comes when the global cryptocurrency markets are at an all-time high.
The Bank of England and HM Treasury will engage with many important stakeholders to ascertain if a CBDC is worth introducing and if so, what format it should take.
The Bank of England’s official announcement confirmed the creation of a the new CBDC taskforce, whose primary goals include the evaluation, design, and assessment of any potential digital currency for the UK. Another primary role for the task force is ensuring that any UK CBDC is “at the forefront of global innovation,” leading other countries into the digital currency period.
To further engage with stakeholders, the Bank of England is creating the CBDC Engagement Forum, which will explore the non-technology aspects of the introduction of a CBDC, and the CBDC Technology Forum, which will cover all areas of technology with a strong cross-section of expertise from all walks of life.
A UK CBDC has been on the cards since at least early 2020. The Bank of England formed a group with five other central banks to explore the potential of CBDCs. Two of that group, the Sveriges Riksbank (Sweden) and the European Central Bank (ECB), are already developing CBDCs at differing stages of progress.
Furthermore, many other nations are developing sovereign digital currencies. Most prominently, The People’s Bank of China appears most advanced in its pursuit of a digitized version of the yuan.
CBDC or Cryptocurrency?
While a central bank digital currency sounds exactly like a cryptocurrency, there is one major difference between the two. Most cryptocurrencies, like Bitcoin, use a decentralized distributed ledger to track payments, meaning all payments are publicly available.
Whereas a CBDC does not use the same decentralized distributed ledger technology, keeping the transaction ledger centralized and the sole charge of the government.
There are other differences between CBDCs and cryptocurrencies, but the difference in the fundamental technology is one of the biggest distinctions.
Even with the success of Bitcoin and other cryptocurrencies, national governments were always going to pursue digital currencies that they exert great control over. For many, the only surprise is that it has taken some of the world’s major nations this long to explore the options and implications fully.
With the knowledge that a CBDC is inevitable, we can begin guessing at names for the UK’s CBDC. Britcoin, anyone?
