The Treasury and the Bank of England are in talks about the possibility digital pound, or Central Bank Digital Currency (CBDC). Talks are being initiated as both HM Treasury and banks want access to ‘safe money’ that can be conveniently used by the public in the future. People’s daily lives are becoming more and more digital, and new digital coins can also support innovation in the private sector.
Issued by the Bank of England, the digital pound can be used by households and businesses for daily payments in stores and online, and is convertible and complementary to cash and bank deposits.
At the moment, no decision has been taken to introduce a digital pound, but the Bank of England will, as they say, “go ahead with further research and development work”. Members of the public are invited to give their opinion on the plans to move forward.
The consultation is open for comments until 7 June 2023. The coin then reaches the “design stage” where technical and policy requirements are reviewed so that development can be accelerated should a decision be made to build it.
According to a press release from Bank of England website The digital pound will replicate the role of cash in the digital world. This means that £10 digital pounds is always worth £10 cash.
As the coin is issued by the Bank of England itself, it is subject to privacy and data protection, and according to the Bank of England, neither governments nor banks have access to personal data. Owners can also experience the same level of privacy as a bank account. Digital Pound is accessed through digital wallets provided by the private sector to consumers through smartphones and smart cards, is intended for online and in-store payments, not for savings, and does not pay interest on holdings. When the currency is actually issued, there is an initial limit to how much an individual or company can hold.
According to the Bank of England, the needs of vulnerable people have been taken into account in the design process of the digital pound, making it simple, easy to use, understood and trusted by the public as a form of money, according to the Bank of England. .
Unlike cryptoassets and stablecoins, digital pounds are issued by banks, not the private sector. This means that it has intrinsic value and is not volatile unlike (unbacked) crypto assets because there is a central authority to back it up.
But why do we really need a digital pound when most payments are already digital in the first place?
The most obvious and immediate benefit of CBDC in the form of a resilient and secure technology platform, the “core ledger,” is a faster, cheaper and more efficient payment system, both domestically and internationally. It reduces the cost of creating, distributing, and protecting physical money. These gains can increase the productivity of an economy, a fundamental aspect of economic development.
But is such an implementation only positive? What are the drawbacks of such a coin?
The important point is that CBDC can become a mechanism of central (government) control at all levels. This may be hard to imagine for someone who grew up in a free world. The problem with cashless digital currencies is that you can’t withdraw your digital tokens and store them under your mattress. This gives central banks more flexibility to introduce negative interest rates, which encourages people to spend or lose money, increasing consumer spending.
The Chinese Communist Party is now already developing a central bank digital currency that will allow the government to monitor and control the behavior of its citizens as part of a larger social credit system.
China’s early social credit system gave citizens a credit score based on their online and offline behavior. Reward “good” behavior, such as spending time with people with disabilities or the elderly, and punish “bad” behavior, such as spending too much time protesting the government or playing video games. give.
But when “trust” is undermined, limits are set. This means that citizens who commit minor offenses can be blacklisted from traveling, going to restaurants, watching movies, buying insurance, and even renting or buying a place to live. there is. no, this is An episode of the Netflix series Black mirror but according to Chinese state media, this appears to have already happened to more than 30 million citizens.
New big data-backed central bank digital currencies and electronic payment systems could give the CCP another tool at its disposal to monitor and control the behavior of its citizens.
Alex Mann, Partner Concentric Pan-European VC leading Timechain, the company’s bitcoin-focused fund.
“The CBDC is an affront to the proud tradition of individual freedom enshrined in the post-Magna Carta British Constitution. CBDC, by its programmatic nature, is necessarily combined with a CCP-style “social credit score” to “encourage” behavior that the political system of the time considered desirable. Money ceases to be money and becomes more akin to a coupon when it is limited in how it can be used and how it can be used.
In contrast to CBDC, Bitcoin is the only decentralized, fair and open currency protocol in the world. If the UK government is serious about innovating its way out of the current inevitable debt turmoil, it needs to embrace innovation once again and embrace Bitcoin. Bitcoin is an open, digital currency protocol and its architecture is inherently more performant, adaptable, and capable than previous CBDCs. Its open-source and permissionless nature leaves the private sector free to innovate, much like the Internet. is useful to think of as the Internet of Value, a means of transmitting value securely and at the speed of light.
Bitcoin is inevitable. It will and has been adopted by free people all over this planet. A country that adopts a CBDC will put him at the forefront of 21st century prosperity, while a country that seeks to limit and reduce its population via a CBDC will fall into insignificance and despair. . It’s BTC, not CBDC. “
Bank of England Governor Andrew Bailey said:
“The need for a digital pound in the future will continue to grow as the way we pay for the world and things around us is digitized. Maintain confidence in and better protect financial stability.“However, our technical work has several implications that need careful consideration. .”