The digital pound developed by the Bank of England could end up running on software that is not blockchain, the distributed ledger technology that underpins cryptocurrencies and other digital coins issued by central banks.
All options are being considered as the UK embarks on research to see if creating a digital pound, dubbed the “Britcoin”, is worth it, according to Tom Mutton, who leads the Bank of England’s central bank digital currency (CBDC). At a recent meeting of technologists organized by the Bank to discuss how a digital pound could be developed, “none of them agreed with each other at any point,” Mutton said in an interview for the Bloomberg News podcast.
The bank plans to trial several different versions of ledgers, including public blockchains similar to those that underpin cryptocurrencies such as bitcoin, to see which would work best for a UK CBDC. Proponents of blockchain technology tout its effectiveness over existing payment systems, and more than a hundred central banks around the world are studying whether the digital currency is good for their economy.
“We definitely want to be compatible with distributed ledger business models in the private sector, but we weren’t convinced that distributed ledgers were more efficient than regular ledgers,” Mutton said. “He’s very open.”
The UK Treasury and the Bank set up a joint working group to review the UK CBDC in April 2021. An initial proposal this year called for a cap on the number of digital pounds consumers could hold to avoid excluding private sector banks from the financial system.
The call for a response to the Bank’s consultation on whether to build a CBDC is due to end June 30, after which it will spend two to three years evaluating technology and policy requirements before making a final decision. The earliest that a CBDC can eventually appear is − in the second half of this decade.
The digital pound will be the first consumer service launched by the Bank in some time. The product will likely not have the Bank of England branding, Mutton said, as consumers will primarily use digital pounds through wallets developed by companies in the private sector.
“I’m not sure we want people to see this as a product of the Bank of England,” Mutton said. “Perhaps it would be better to consider this as a payment method that is offered by your private sector wallet and you just know that it is very, very secure.”