British Treasury and Bank to explore potential for digital pound

A digital currency could benefit cross-border payments. Picture: Dominic Lipinski/PA

The UK Government will set up a new taskforce to explore whether the UK should have its own digital currency, one of a series of possible reforms designed to benefit the financial technology sector.

The Bank of England and the Treasury will jointly explore the objectives of establishing a central bank digital currency, and explore the risks as well as the benefits.

It is a step along the path of creating an e-pound, a sort of digital bank note.

However, authorities said they are still committed to supplying cash to those who need it.

Digital currencies are already being explored or even implemented in several other countries. 

They could bring benefits in the way cross-border payments are made, and also take advantage of a general decline in cash payments.

Currently, only the Bahamas has such a currency, although China is trialling it in several cities.

The Chancellor said the Government’s vision is for a more open, greener, and more technologically advanced financial services sector (Stefan Rousseau/PA)

Earlier this week, the boss of Sweden’s central bank said the country could have such a digital version of its currency by 2026, while the boss of the European Central Bank has indicated an electronic euro might be created within four years.

The idea of a central bank digital currency draws inspiration from Bitcoin and other cryptocurrencies, without itself being a cryptocurrency.

The new taskforce is part of a series of measures that the UK Chancellor Rishi Sunak hopes will help the UK’s financial technology sector.

As part of these measures, the UK Financial Conduct Authority (FCA) will set up a so-called scale box, which would support companies trying to scale up innovative technology.

The authority already runs a regulatory sandbox which allows companies to test innovations in the market, on real consumers.

The UK Chancellor also committed to consult on proposals from a review into how companies list their shares on a public market in the UK.

It will explore ways that would make it easier to supply information on how companies think they will perform financially in the future. 

Investors are always interested in forward-looking financial information, especially when putting money into companies with high potential for growth.

Mr Sunak said: “Our vision is for a more open, greener, and more technologically advanced financial services sector.

“The UK is already known for being at the forefront of innovation, but we need to go further. The steps I’ve outlined today, to boost growing fintechs, push the boundaries of digital finance and make our financial markets more efficient, will propel us forward.

“And if we can capture the extraordinary potential of technology, we’ll cement the UK’s position as the world’s pre-eminent financial centre.”