Digital pound benefits assessment conducted in UK as CBDC rollout approaches

The UK Digital Pound is accelerating its efforts to understand the potential consequences of launching a CBDC. At the behest of the UK Parliamentary Committee and the House of Commons, the Bank of England and the UK Treasury have analyzed the benefits that could arise from the launch of this CBDC. This is because the UK is trying to avoid excessive spending on CBDC pilots and trials. The Bank of England (BoE) has begun due consideration of a CBDC. The lender has engaged MIT to break down the advantages and disadvantages of CBDCs.

English CBDCs are being scanned to identify the issuance, distribution and privacy benefits of incorporating the digital pound as part of their existing financial system.

“We have heard evidence that a wholesale CBDC could bring potential benefits to wholesale payments, including reducing settlement times and counterparty risks. The design of the digital pound proposed by the Bank of England and the Treasury is for a ‘platform model’, in which the Bank of England will provide the core public infrastructure and issue the digital pound, which will be recorded on a ‘core ledger’. The House of Commons Treasury Committee wrote in a official post,

CBDCs are central bank digital currencies that are essentially digital representations of fiat currencies on a blockchain network. Introducing CBDC as a method of digital payments could help nations meet their environmental goals and reduce reliance on paper cash notes. Furthermore, the transaction history recorded for a CBDC will be immutable which will make record-keeping even more transparent.

As part of the assessment, the Bank of England said CBDCs could reduce the high payment costs faced by small merchants. The digital pound could result in market concentration, support financial inclusion, and improve domestic payment flexibility as well as cross-border payments.

At the moment, neither the Bank of England nor the UK Treasury have any concrete timelines regarding the preparation of a digital pound. The evaluation report also states that America is also in no hurry to establish its CBDC.

“Although cash is here to stay, a digital pound issued and supported by the Bank of England could be a new way to make payments that is reliable, accessible and easy to use. “We therefore want to first examine what is possible, while always ensuring that we protect financial stability,” Treasury chief Jeremy Hunt said in a statement in February this year.

Meanwhile, countries that are ahead of the CBDC game include China, India, Jamaica, and Hong Kong.


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