U.K. is aiming to launch a Central Bank Digital Currency (CBDC)
In earlier news, we saw the Central Bank of the U.K. focusing on new digital currency. It will certainly not replace the cash and card system but will function alongside that. As bank provides paper cash to businesses and households, they will also supply and be the central legal source of digital currency. But it will be in electric form, which means they will function via apps and over the internet. A special task force has been announced for the sake of research towards new currency and market evaluation.
We've seen the burst of cryptocurrency worldwide as more people realise the benefits of having a secondary option to manage finance. Central bank digital currencies (CBDC) by the U.K. government have been selected as the countermeasure to provide completion around the crypto market. Though assigned features seem quite the same but, to be honest, they are not flexible as crypto. Nonetheless, CBDC will let businesses and households make digital payments that the government will naturally source.
The value of CBDC will be equivalent to physical money. A £10 note will be identical to £10 CBDC, as simple as that. Previously we've seen china putting out the effort to digitalise currencies in Yuan. After government protocols and changing routes, different stores, businesses use the payment gateway. This format will help the government stay in a driving seat of money. Whether physical or digital.
According to a reference set by the central government paper, "The E.F. will be co-chaired by the Deputy Governor for Financial Stability at the Bank of England, and Director General for Financial Services at H.M. Treasury. The Bank and HMT will jointly provide the Secretariat. "
A task force has been created to explore information regarding the issue further by UK CBDC. Boosting fintech is important to support the financial mediums with early adoptions. According to the government, "If we can capture the extraordinary potential of technology, we'll cement the U.K.'s position as the world's pre-eminent finance centre."
Digital currencies like Bitcoin, Ethereum is grabbing all the attention from investors, and while crypto is illegal in some countries, governments are still interested in practising safe methods around it. Alongside the U.K. Treasury and a joint task force has been set by the Bank of England to launch its own digital currency version. It is not yet a decided decision but still a work in progress and granted permission once all the benefits and risks are calculated.
The task force announced has an additional task to find and support fintech measures with suitable packages. Jerome Powell, Federal Reserve chair, said they are also looking carefully if the digital dollar would be an optimal solution. The first week of April 2021 was announced as Fintech week. H.M. Treasury and U.K. Central Bank came together for the CBDC cause, followed by trends worldwide. Experts are thinking of values to store against digital currencies; similar way physical currencies are backed The Bank of U.K. came into this digital currency wave by following certain procedures and seeing others trying to do the same.
China’s digital Yuan is set to be fully available by Winter Olympics in Beijing, 2022. ECB president Christine Lagarde said the project could be fully functional within the next four sustainable years. Fed Chair Powell said digital currency is a "High Priority Project." In an article published by the U.K. gov, their goal is to support fintech and boost the project with greater accuracy, which is needed. Financial Conduct Authority (FCA) is trying to keep the regulatory sandbox to a "scale box" package. The goal is not only to support currency for the modern world but alongside the green economy. Firms can test the concepts of sustainable challenges that will come with the project.
Expert groups are further investigating the matter as we speak. They have been tasked to check the potential room for improvement, missing information that could help fill in the gaps, how it would affect the economy and so on. Companies have been invited for purchasing additional shares, but those companies already have some share percentage on the matter. For further information, follow CBDC by the Bank of England and gov page.