We are looking at the case for issuing a digital pound. This type of money is known as a central bank digital currency (CBDC). It would not replace cash.
We're looking at the case for a digital pound
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The digital pound would be a new type of money issued by the Bank of England for everyone to use for day-to-day spending. You would be able to use it in-store or online to make payments.
This type of money is known as a central bank digital currency (CBDC). You may also hear it being called ‘digital sterling’ or even ‘Britcoin’. We call the UK version of CBDC the digital pound.
The digital pound would be denominated in sterling and its value would be stable, just like banknotes. £10 in digital pounds would always have the same value as a £10 banknote.
If we introduced it, it would not replace cash. We know being able to use cash is important for many people. That’s why we will continue to issue it for as long as people want to keep using it.
The digital pound would not be a cryptocurrency or cryptoasset. As opposed to cryptocurrencies, which are issued privately, the digital pound would be issued by the Bank of England and be backed by the Government.
We have published a Consultation Paper, which explores the need for the digital pound and proposes a set of design choices for it.
How might it work?
A day in the life of a digital pound user
7am
Check your balance on the digital pound wallet.
10am
Buy a cup of tea with digital pounds using your smartphone – just tap it on the same device used for credit and debit cards.
3pm
Pay the electrician in digital pounds – both of you get an instant notification that the payment is complete.
6pm
Order groceries online and pay for them using the digital pound option on the website checkout.
8pm
Transfer money from your bank account into your digital pound wallet.
A digital pound is likely to be needed to fulfil our mission
The way people pay for things is changing. People are not using cash as much as they used to. Digital payments are becoming more common.
There are also new forms of money on the horizon. Some of these could pose risks to the UK’s financial stability.
In light of these trends, the Bank of England and HM Treasury judge there is likely to be a future need for, and benefits from, a digital pound.
The money we issue as the UK’s central bank is the anchor of confidence in our monetary system. This type of money supports the UK’s monetary and financial stability. Today, banknotes are the only type of money we provide for the public to use. Having a digital pound could help us to keep providing this anchor for the UK.
Cash is also very important to ensure people are able to exchange one type of money for another. For example, you can withdraw the money you have in a bank account as banknotes at a cash machine. This is known as ‘uniformity’ of money. Having a digital pound could help us to keep this uniformity in a future where the majority of payments are digital.
The digital pound could also help to improve the options people have for making payments. The model we propose for the digital pound would enable private companies to innovate, make payments more efficient, and give consumers more choice.
You can find out more about our motivations for the digital pound in our Consultation Paper called The digital pound: A new form of money for households and businesses?
Your questions answered
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We are looking into the digital pound because the way people pay is changing.
We aren't using cash as much as we used to, and digital payments are becoming more and more common.
On top of that, new forms of money are emerging and some of these could pose risks to financial stability.
The digital pound would be like an electronic version of the banknotes issued by the Bank of England.
We think the digital pound could help us maintain trust in money and protect our financial system, while also improving payments by increasing efficiency and enabling innovation.
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We haven't made a decision whether to introduce the digital pound. We're still exploring the possibilities. But if we do decide to issue a digital pound, it won't be for a few years.
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If we introduced the digital pound it would not replace cash. Instead, we would like it to work alongside each other as we know that people like to have the option to use both.
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Not in a traditional sense. So you would not be able to open an account with the Bank of England. The way that you would access digital pounds would be through a digital wallet that would be provided by a private company. The reason that we're doing it this way is because we think that private companies are much better placed at providing innovative products and services to the public.
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If we introduced the digital pound, you would be able to do the same things you can do with your money today, such as paying family or friends or buying goods in shops or online.
But new technologies are emerging, which we could incorporate into the design of the digital pound. This would allow wallet providers, from who you would access the digital pounds, to invent and design tools to help you use your money in new ways.
These innovations could change the way we pay and could make payments faster and less expensive.
Wallets would be designed by private companies like banks or payment firms and also new firms appearing over time. But digital pounds would be directly issued by the Bank of England, just like banknotes. That means you would have all of the same safety and security that you have with our money today.
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If you used digital pounds, the Bank of England and the government would not collect any of your personal data and wouldn't be able to see how you spent your money. You would access the digital pound through a virtual wallet and you would have to share some personal data with your wallet provider. This is because you would have a commercial relationship with your provider and they would require some form of ID in order to prevent financial crime or fraud. Your privacy would still be protected by data privacy regulations and your personal data would not be shared with the Bank or the government.
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Neither the Bank of England nor the government would be able to programme your digital pounds or restrict how you spend your money. However, you would have the ability to programme your own payments, if you wanted to.
Today, this would allow you to make automated payments such as paying your rent or mortgage on a set day. But in the future, this feature could also lead to exciting innovations in payments.
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If we introduced the digital pound, we’d ensure it was protected to the very highest standards from things like cyber attacks or power cuts.
Fraud is also a risk people face today when making payments. The authorities and firms providing digital pound services would have a responsibility to ensure the digital pound helps prevent fraud, just like with banknotes. Consumers would enjoy the same protections that they have today.
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You wouldn't earn any interest on your digital pounds, just like you wouldn't earn any interest on your physical cash. A digital pound is designed for day-to-day spending and not for savings.
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The digital pound would not be a cryptoasset. You may have heard of cryptoassets such as Bitcoin and Ether. These are issued privately, whereas the digital pound would be issued and backed by the Bank of England. The value of cryptoassets can also be very volatile, which means they move up and down very quickly at a short notice and that means they are not very useful for making payments. The digital pound, however, would have a stable value over time. That means that £10 of a digital pound would be the same as a £10 banknote.
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A digital pound wouldn’t be bad for the environment. It would be highly efficient and not use the same energy-intensive methods that you see with the likes of Bitcoin. A digital pound would be in line with the Bank's efforts to reduce its carbon footprint and meet its environmental targets.
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If we introduced a digital pound, we would like everybody to be able to use it, not just those people who are comfortable with technology. Most people would access their digital pounds through a virtual wallet on their smartphone. But we are also looking at other ways too, for example, a physical card like a debit card.
You wouldn't earn any interest on your digital pounds, just like you wouldn't earn any interest on your physical cash. A digital pound is designed for day-to-day spending and not for savings.
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If we introduced a digital pound, we think we would need to set a limit for how much people could hold. This would give us the time to understand the impact that it might have on the financial system and help us ensure it wouldn't cause disruption.
Once we better understand this and how people use it, we would review this limit. We've not yet decided what the limit would be, but it would be high enough for day-to -day spending. So you would receive all sorts of payments, such as your salary, without worrying.
We’re asking people for their views
We haven’t made a decision on whether we will introduce the digital pound. Together with HM Treasury, we have published a consultation paper on The digital pound: a new form of money for households and businesses?.
This paper analyses the public policy case for the digital pound in the UK and sets out our proposed design for it.
We have also published a Technology Working Paperalongside it. This paper looks at the technical aspects of the model we are considering, including performance, security, resilience and energy use.
How can I have my say?
The deadline for responses to the Consultation Paper and Technology Working Paper has been extended. These now close on 30 June 2023. This is due to the omission of the following question from the Consultation Paper online response form: “Do you have comments on our proposal that non-UK residents should have access to the digital pound, on the same basis as UK residents?” (Question 9 in the Consultation Paper).
We welcome views from individuals, businesses and organisations on the questions that we outline in both papers, and we will take those responses into account for the next phases of work.
What are the next steps for the digital pound?
Work will now move onto the design phase over the next 2-3 years, which will look at the technology and policy requirements for a digital pound.
If the results of this phase conclude that the case for the digital pound is made, we will move into a build phase. The earliest date we would issue the digital pound would be the second half of the decade.
We’re engaging with businesses and communities
We are speaking to businesses and communities to find out what impact the digital pound would have on them.
Together with HM Treasury we set up a Central Bank Digital Currency Taskforceto oversee our work. This taskforce has been involved in the Consultation Paperpublished on 7 February 2023. We are also working closely with other UK public authorities and international partners and organisations. For example we are working with the Bank for International Settlements. And we are staying in touch with finance ministries and central banks in other countries.
We have been exploring the digital pound for some time now. In March 2020, we published a discussion paper on CBDC. This outlined one possible approach to the design of a central bank digital currency. We sought feedback from the payments industry, academics, and other interested parties. You can read a summary of the responses to our 2020 discussion paper.We published the responses in July 2021 and produced a webinar based on them.
In April 2021, together with HMT, we set up two forums to help inform our work. We publish the minutes of CBDC forum meetings.
As a complement to the consultation, we are asking UK firms to complete a digital pound surveyto give us a better understanding of whether firms would use a digital pound as part of their business, participate as a service provider, what firms see as potential opportunities or challenges, and what they would expect from us as the operator of a potential digital pound core infrastructure. If you are a firm based in the UK, we welcome your response to this survey.
CBDC Engagement Forum
The CBDC Engagement Forumlooks at all aspects of a central bank digital currency apart from the technology it might use.
The forum helps us to understand the practical challenges of designing, implementing and operating a CBDC, which includes:
- how a currency will be used (‘use cases’)
- functional needs of users
- the role of the public and private sectors
- financial and digital inclusion
- data and privacy implications
The forum’s members come from financial institutions, civil society groups and merchants. We chose them by an open application process (the window for that has now closed). We chair this forum jointly with HM Treasury.
CBDC Technology Forum
The CBDC Technology Forumlooks at the technology a central bank digital currency might use. The forum enables us to involve people with a wide range of expertise and perspectives. This helps us to understand the technological challenges of a designing, implementing and operating a CBDC.
The forum’s members come from a range of financial institutions, universities, fintechs, infrastructure providers and technology firms. We chose them through an open application process (the window for that has now closed).
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This page was last updated 01 June 2023
