UK to explore issuing its own digital currency amid bitcoin boom
Fifty and twenty pound banknotes and a Bitcoin logo can be seen in this photo illustration.
Omar Marques | SOPA Pictures | LightRocket via Getty Images
LONDON – The UK is the youngest country to join a global race for central bank digital currencies.
“We are starting a new task force between the Treasury and the Bank of England to coordinate the exploratory work on a potential digital currency for the central bank,” said UK Treasury Secretary Rishi Sunak at a conference of the fintech industry on Monday.
In a separate statement, the Bank of England stated that such currency was a “new form of digital money issued by the Bank of England and used for households and businesses” that coexist rather than replace cash and bank deposits.
The UK government has not yet decided whether to launch a digital version of the British pound, but said it would examine the “objectives, use cases, opportunities and risks” associated with it if it continued. The Bank of England will also set up a unit within the institution dedicated to research into a central bank digital currency.
Several central banks are trying to develop their own strategies for central bank digital currencies (CBDCs). The rise in Bitcoin and other cryptocurrencies has given new impetus to such initiatives, as has the broader trend of declining cash use.
Bitcoin hit a record high of $ 64,829 last week ahead of the highly anticipated debut of the cryptocurrency exchange Coinbase. But the world’s most popular digital coin fell sharply over the weekend due to regulation fears.
A surge in value of meme-inspired Dogecoin tokens has since raised concerns about a possible bubble in the cryptocurrency market. As of Monday, Bitcoin was trading at around $ 56,740, up 3% over the past 24 hours.
Another factor driving central banks’ work on CBDCs is private stablecoin projects like the Facebook-backed Diem Association and a controversial token called Tether. Such currencies attempt to peg their market value to an external reference point such as the US dollar in order to avoid volatile price fluctuations that are common in most cryptocurrencies.
China appears to be charging CBDCs before other large countries. The People’s Bank of China has conducted a series of tests on the digital currency in major cities, and a top official said Sunday that the central bank could test the digital yuan with overseas visitors at the 2022 Beijing Winter Olympics.