Earlier this year, the Bank of England and the UK government’s finance department released a document to gather public input on creating a digital version of the country’s currency issued by the Central Bank.
During that period, officials mentioned the possibility of introducing a digital pound by the latter half of the current decade. The aim was to prevent the division of an existing electronic payment system that is largely controlled by major technology and banking companies.
Recently, on July 4, UK Finance, an association representing banks and financial institutions in the UK, shared its perspective on this issue.
Specifically, UK Finance recommended that each person should be allowed to hold a maximum of £3,000 to £5,000 in the envisioned digital pound. This limitation aims to prevent panic and the potential occurrence of bank runs.
UK Finance Urges Clear Objectives for Digital Pound Implementation:
UK Finance Proposes Lower Limit on Digital Pound to Address Risk of Bank Runs : Following earlier recommendations from the British government and central bank to impose a temporary cap of £10,000-£20,000 on the digital pound, UK Finance, a financial membership organization, suggests a significantly lower limit. They express concerns about the potential for the digital pound to worsen deposit runs during times of financial instability.
Furthermore, the organization highlights the need for the UK authorities to clearly define the objectives and purpose of the digital pound. They emphasize that it is essential to understand its intended role in the market and why it is the most suitable solution to address specific needs. The current consultation lacks clarity regarding the positioning of digital central bank money within the market.
UK Authorities to Make Final Decision on CBDC by 2025:
UK Finance is a big group that represents over 300 important financial companies, including well-known banks like Barclays, HSBC, Lloyds Banking Group, NatWest, Halifax, and Santander. It helps these firms work together and speak as one in the finance industry.
The digital pound, also known as ‘Britcoin,’ is the UK government’s plan to create a secure type of digital money. Its purpose is to discourage people from using private stablecoins like Facebook’s Libra project, which didn’t succeed.
The UK Treasury and the Central Bank are currently investigating different ways a central bank digital currency (CBDC) could be used. They are expected to make a final decision about it by the year 2025.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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