However, concerns have been raised over how safe this crypto variant will be, particularly in regards to the country’s plans involving sustainable development. Specifically, the bank is looking at introducing a Central Bank Digital Currency (CBDC) which would be a new form of currency for the institution. Similar to regular cryptocurrency, CBDC is an electronic or digital token, however it is representative of a country’s national currency.
Cryptocurrencies, such as Bitcoin, are widely considered safe as they are built on the blockchain and use secure cryptography. Despite this, Bitcoin is considered an insecure investment due to market volatility.
Next year, the Treasury and the bank will launch a consultation which will set out their assessment of the case for a UK CBDC.
This will include looking at the pros and cons of developing an operational technological model for the UK’s very own CBDC.
Despite the consultation being set to launch in 2022, no formal decision has been made on whether a CBDC will be fully integrated across the UK as it would be a major infrastructure project.
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Instead, this consultation will look into whether authorities should move into a developmental face of creating a ‘Britcoin’.
It is unlikely that any form of CBDC or Government-approved Bitcoin alternative will be introduced to the public until the later part of the decade, according to the Bank of England.
John Glen, the Economic Secretary to the Treasury, outlined what the consultation would look like and encouraged stakeholders to get involved.
Mr Glen said: “The UK, like many countries, is actively exploring the potential role of a retail central bank digital currency (CBDC) as a complement to cash and bank deposits. A retail CBDC would be a new form of digital money, denominated in Sterling and issued by the Bank of England, for use by people and businesses for their everyday payments needs.
“Exploring the opportunities that a CBDC could offer is aligned with the government’s wider agenda to remain at the forefront of innovation and technology in financial services.”
“Exploring the opportunities that a CBDC could offer is aligned with the government’s wider agenda to remain at the forefront of innovation and technology in financial services.
Jon Cunliffe, the bank’s Deputy Governor for Financial Stability, elaborated on how the plan will inform decision-making by the financial body and the Government down the line.
Mr Cunliffe explained: “The plan to publish a consultation next year on CBDC is a crucial step in our policy development, especially as we further our thinking on the pressing issues at hand.
“What it will do is provide a platform for interested parties and relevant groups to engage with the key questions on the merits of CBDC, and whether the public sector should advance to a development phase.”
However, concerns have been raised over the Government’s decision to pursue its own CBDC or crypto alternative due to the environmental issues raised by other currencies, such as Bitcoin.
Earlier this year, Joe Baguley, Vice President of EMEA at VMware, explained why the Government should prioritise creating a sustainable CBDC model.
Mr Baguley said: “The UK’s plans to look into its own CBDC, Britcoin, is testament to more mainstream adoption of cryptocurrencies and realisation of its potential to truly revolutionise the way we move money around the world today.
“Whilst there is an urgent need for more regulation in the crypto space, it’s important when developing Britain’s own CBDC, that we look to lead the way from a sustainability perspective too.
“We need to learn from the fundamental mistake the founders of Bitcoin made by building the cryptocurrency on a proof-of-work blockchain which consumes an incredible amount of energy.
“Whoever created Bitcoin wasn’t thinking about sustainability when it was created and now adoption is increasing, more energy is being used among mining operators.
“We cannot unpick the environmental problems it has caused and plugging renewable resources into powering these blockchains simply isn’t enough.”
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