Digital Pound Legislation Will Provide Protections to Privacy and Control, Govt Says

The U.K. government has said it will ensure that future legislation that comes out for a digital pound will provide protections to privacy and control of money in its consultation response on Thursday.

The consultation on a central bank digital currency (CBDC) was conducted by the government’s finance ministry alongside the Bank of England, and concluded in June. It received over 50,000 responses. A chief concern in the consultation was privacy and control of money.

Countries around the world are exploring the benefits of CBDCs, with Nigeria and the Bahamas being among the first countries to issue them. Major economies like the European Union and China are also running investigations or tests.

The Bank of England and the Treasury are taking a cautious approach when it comes to deciding on whether or not to introduce a digital pound.

“Trust in all forms of money is an absolute necessity," Deputy Governor for Financial Stability at the Bank of England, Sarah Breeden, said in a press release. "We know the decision on whether or not to introduce a digital pound in the U.K. will be a major one for the future of money. It is essential that we build that trust and have the support of the public and businesses who would be using it if introduced.”

The consultation response showed that the proposed digital pound design was largely welcomed. A decision on whether or not to issue a digital pound has not yet been made but that will likely occur between 2025 and 2026. Before a digital pound can be launched, Parliament, the U.K.'s law making body, would have to put through legislation. The legislation introduced will also ensure that the government cannot program a digital pound.

The Treasury Select Committee, a cross party group that scrutinizes the Treasury's work, proposed that a digital pound should have a lower holding limit similar to the 3000 euro cap, something which banks favored also according to the consultation response.

However, the Bank of England has indicated in its consultation response that it is sticking with its 10,000-20,000 British pound cap ($12,727.6 - $25,460.6) on holdings for now but may review this in future as many academics and FinTech providers preferred either this or having no limit at all. The committee also suggested that a digital pound should come with interest rates, something which the central bank does not intend to do either.

The digital pound will be accessible abroad in several countries, except sanctioned ones, someone familiar with the matter told CoinDesk.

"The Bank of England will undertake experiments with companies to test how a digital pound could work in the real world," the consultation response said. "We are also committing to further public consultation prior to legislation being introduced."

Read more: Digital Pound Should Be Interoperable With Crypto, UK Lobbyists Say

UPDATE(Jan 25 14:28 UTC): Adds detail from the consultation response throughout.