The government is set to build a new taskforce to explore the possibility of the UK having its own digital currency.
The new taskforce is part of a series of measures that the Chancellor Rishi Sunak hopes will help the UK’s 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 being explored, and in some cases implemented, in several countries which could benefit the way cross-border payments are made, and also take advantage of a general decline in cash payments.
China is currently trialling a similar idea in several cities while only the Bahamas currently has such a currency.
The idea of a central bank digital currency draws inspiration from Bitcoin and other cryptocurrencies, without itself being a cryptocurrency.
One of the benefits of an e-pound would be as a back-up to card payments.
Last 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.
At present, customers can turn to cash as an alternative if they are in a shop where the card machines have stopped working but as cash use becomes more uncommon – fewer than one in 10 payments in the UK are expected to be made with paper money by 2028 – its place as a contingency to electronic payment systems will decline.
A digital currency could be another contingency system, according to a Bank of England report from last year.
It would also provide another way to pay online, where cash cannot be used.
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.”
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