The U.K.’s approach to handling privacy concerns posed by a digital pound should help quench concerns, according to interviews with a wide range of crypto industry legal and technical insiders.
Bank Of England Reconsiders: Potential Freeze On CBDC Launch Raises Concerns
On January 25, the Bank of England (BoE) and HM Treasury published a response to the Consultation Paper regarding a ‘digital pound’ issued in February of 2023. The consultation paper sought the public’s feedback on introducing a UK central bank digital currency (CDBC).
Is The UK Ready To Introduce Their CBDC?
The BoE and HM Treasury consider that introducing a CBDC could provide people with an “additional choice of safe payment that is fit for the future,” unlock development opportunities for businesses, and make day-to-day payments more “convenient” while reducing costs for those who accept them.
The consultation response highlighted that the consultation marked the beginning of the design phase of the digital pound project and, according to the BoE and HM Treasury, the developing process of a CBDC and its platform will present lasting benefits for the digital economy of the country, regardless of the decision that is ultimately taken.
The consultation collected over 50,000 responses from the public, including individuals, businesses, and academia. The feedback illustrated some general concerns the respondents had regarding the digital pound.
Due to these concerns, the response by the BoE and UK Treasury determined that “it is too early” to decide whether to introduce a digital pound, as the feedback makes clear “that legislation introduced by the Government for a digital pound would need to provide protections to guarantee users’ privacy and control of their money.”
Respondents Concern Over A Digital Pound
The feedback received from the respondents brought forward two key concerns: privacy and the possibility of cash being replaced.
The response clarified that a digital pound would not replace cash, any existing form of money, or payment like debit and credit cards. However, it would complement physical money and other payment methods “as a new form of digital money for use by households and businesses for their everyday payment needs.”
To guarantee this, the response explained that “the Government has legislated to safeguard access to cash, ensuring that it would remain available even if a digital pound were launched.”
Regarding user privacy, the response acknowledged the importance of ensuring trust in a CBDC issued by the central bank is essential. Therefore, to guarantee that privacy is a core design feature of a digital pound, the following measures were made: the BoE and HM Treasury won’t have access to users’ data.
The BoE committed to exploring technological options to prevent the bank from accessing users’ data through its core infrastructure, and the BoE and UK Treasury would not program the digital pound.
The BoE and HM Treasury assured their commitment “to maintaining an open and collaborative approach throughout this design phase” by increasing both organization’s engagement with experts from the industry, civil society, academics, and technical specialists.
Lastly, the response confirms that experiments will be undertaken with companies “to test how a digital pound could work in the real world.”
The launch of the CBDC will be decided after the design phase culminates around 2025. If the decision to build a digital pound is taken, its introduction will come only after both Houses of Parliament have passed the relevant legislation.
Digital Pound Legislation Will Provide Protections to Privacy and Control, Govt Says
Many respondents to the digital pound consultation said that they had concerns about privacy and control.
UK Lawmakers Urge Lower Digital Pound Holding Limits
They also want the government to tweak plans to make sure the CBDC’s design won’t preclude the possibility of paying interest on the digital pound.
Digital Pound Consultation Received Over 50,000 Responses, With Privacy a Major Concern
Many of the respondents outlined concerns around privacy, programmability and the decline of cash, Jon Cunliffe, deputy governor of the Bank of England said.
Bank of England Wants Digital Pound Advisers as It Moves to CBDC Design Phase
The Bank of England has also started recruiting for its central bank digital currency engagement forum.
Payments Platform Nuggets Working With Bank of England on Privacy Layer for Digital Pound
The BofE said in February that a digital pound was likely needed, but that it will not make a decision on issuing one until at least 2025.
Digital Pound Should Be Interoperable with Crypto, U.K. Lobbyists Say
Stakeholders also want the Bank of England to consider tougher caps on individual digital pound holdings to prevent bank runs.
Bank of England thinks digital pound can co-exist with private stablecoins
The central bank wants an e-GBP to be retail-focused and could form part of a “mixed payments economy” alongside cryptocurrency stablecoins.
UK’s digital pound would modernize payments but won’t replace cash: Minister
Finance minister Jeremy Hunt says the digital pound, or “Britcoin” would be issued and backed by the Bank of England, but won’t negate the use of cash.
UK Economic Affairs Committee unconvinced by prospect of retail CBDC
A new report highlights private-sector innovation and greater financial inclusion with CBDCs, but raises concerns around the descending hegemony of the U.S. Dollar.
Bank of England sees CBDCs as a revolution for the future of money
The Bank of England estimates that 20% of retail and consumer deposits could potentially move toward CBDCs.
UK Treasury and central bank will consult on CBDC, potentially launching by 2030
“The earliest date for launch of a U.K. CBDC would be in the second half of the decade,” said the Bank of England, adding no final decision has yet been made.