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UK Treasury and Bank of England Establish Criteria for Future Digital GBP Launch

Initial steps in the UK's digital pound journey

As the UK navigates its path towards potentially introducing a central bank digital currency (CBDC), the Treasury and the Bank of England are proceeding with caution. In a detailed response to the Treasury Committee on January 25th, the government emphasized its ongoing exploration into the feasibility and design of a digital pound, stressing that a final decision is yet to be made.

This exploratory phase involves defining specific criteria and developing a comprehensive framework to assess the viability of this national digital asset. The government's approach is meticulous, aiming to "deepen our understanding" of how a digital pound can offer opportunities while mitigating risks. Harriet Baldwin, the chair of the Treasury Committee, highlighted the significance of this venture, labeling the digital pound as a "major technology project" that warrants proceeding only if it presents clear benefits over potential risks.

The HM Treasury and the Bank of England stated:

“The design phase will deepen our understanding of how to design a digital pound that maximises opportunities whilst mitigating risks and aims to develop a robust evidence base to inform a decision later this decade as to whether, or not, to proceed to launch,” 

Addressing key concerns: privacy and cash access

In the realm of digital currency, privacy remains a paramount concern. The Bank of England and the Treasury are acutely aware of this, as evidenced in their joint statement. They assure that any future digital pound would be designed with robust privacy safeguards. These measures include legal protections for user privacy and stringent limitations on law enforcement's access to personal data, only permissible on a fair and lawful basis. 

The commitment to privacy is so strong that in the event of a retail CBDC rollout, the Bank of England and the UK Treasury would not have direct access to user data.

The committee’s chair said:

“One of the key risks is around the potential misuse of data, which is why we recommended privacy protections be enshrined in primary legislation should a digital pound be introduced,” 

Simultaneously, the UK government is keenly focused on ensuring that the introduction of a digital pound does not marginalize traditional cash usage. Their stance is clear: a digital pound is envisioned as a complement to, not a replacement for, physical cash. The commitment to maintain cash access for those who choose it is a critical aspect of their approach, reflecting a balanced consideration of technological advancement and traditional monetary practices.