UK Rushes to Introduce Britcoin
The UK Treasury and Bank of England presented the digital pound to “the people’s court,” with Britcoin being floated as the name of the proposed CBDC. The project is expected to launch after 2025 and will bring about a great deal of change.
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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
Chancellor of the Exchequer Jeremy Hunt explained.
Britcoin: The Future of UK Currency?
The Bank of England and the Treasury promise that 10 digital pounds will always equal 10 physical pounds. This central bank digital currency (CBDC) is backed by traditional money and interchangeable with cash and bank deposits, offering “no volatility unlike unbacked crypto assets,” according to the powers that be.
The level of confidentiality for CBDC owners will be the same as for those who own sterling bank accounts. Anonymity is not an option. Britcoin will be accessible through digital wallets provided by private companies, with consumers required to pass KYC checks. Law enforcement agencies will be able to request information on CBDC holders from banks.
A word for limitations
The UK government plans to impose limits on the amount of CBDC that individuals can hold at the initial stage. On the one hand, authorities aim to encourage people to use Britcoin instead of cash. On the other hand, there are concerns about a rapid outflow of funds from bank deposits to digital pounds.
The limit is expected to be set at 10-20k GBP, allowing 75-100% of citizens to receive their salaries in Britcoin, according to financial experts.
Britcoin isn't intended for saving, according to the Bank of England, as they announced that no interest would be paid on holding CBDC in a financial institution.
The reasons for the change
The Bank of England and the Treasury have already faced questions about the purpose of Britcoin, as consumers struggle to see the difference between it and traditional online payments.
The British are abandoning cash
Source: UK Finance
Officials are publicly declaring that Britcoin has a purpose. They believe that a world where the use of cash disappears and Amazon or Alphabet release their own stablecoins is not desirable.
We cannot ignore the fact that the safest form of money, ‘public’ money – that is to say money issued by the state for general use – will become increasingly less useful
says John Cunliffe, deputy governor of the Bank of England.
Consumers are favoring privately-supported card payments over those backed by the government. Yet it's not enough for the authorities to have a slice of the cake. They want the whole enchilada.
In the meantime, businesses will be encouraged to focus on providing innovative customer services. Digital wallets will retain their role in facilitating technical support for Britcoin transactions between the Bank of England and citizens.
According to Canliffe, Britcoin will not allow tech firms' coins to monopolize the online market. The government is probably preparing for that itself. Cheaper and faster payments, especially cross-border ones, will be a boon for consumers.
According to British officials, these arrangements are part of a global central banking effort. Similar proposals are being considered by countries around the world, including the Eurozone, the US, and China. We are at the doorstep of the Brave New World.
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