The Bank of England and HM Treasury recently announced plans to create a Central Bank Digital Currency (CBDC). This is potentially the first step for a digital currency issued by the Bank of England that would exist alongside cash and other payment methods, rather than replacing them outright. Central banks worldwide are growing concerned at the pace of innovation among blockchain technology and the rate at which financial institutions are adopting cryptocurrencies.
The UK is the latest to join the global race to develop CBDCs.
Nicknamed “Britcoin,” the UK is the latest to join the global race to develop CBDCs. From Tesla to Visa, several major institutions are exploring ways to enable institutional investments and consumer payments using cryptocurrencies. News of Britcoin came just days after Coinbase—the largest cryptocurrency exchange in the US—went public. Chancellor of the Exchequer, Rishi Sunak, announced that Britain “need[ed] to go further” to stay at the forefront of financial innovation.
CBDCs are still in development around the world.
CBDCs are still in development around the world. As such, they have no standard definition or proven use cases. Britcoin is in its very early stages. A task force is exploring the potential a CBDC could hold for the UK government and economy, but no decisions have been made yet to develop one. Central banks are developing CBDCs to retain control over monetary policy, especially as cryptocurrencies are increasingly used for payments and transactions: a financial realm where central banks have no jurisdiction or leverage. China has been leading the CBDC race with the People’s Bank of China successfully piloting digital yuan in several cities.