HM Treasury and Bank of England Consultation Response

Bim Afolami Excerpts

Thursday 25th January 2024 Written Statements

[The Economic Secretary to the Treasury (Bim Afolami)]

The Government have today laid the response to the Bank of England and HM Treasury’s consultation paper, “The digital pound: a new form of money for households and businesses?”—(CP 970).

The Bank of England and HM Treasury have been exploring the concept of a UK retail central bank digital currency (CBDC), or “digital pound”, issued by the Bank of England. A digital pound would be a new form of digital money for use by households and businesses for their everyday payment needs, and a complement to physical cash and other means of payment. However, it is important to stress that no decision has yet been made to build or issue a digital pound, either for corporates or for the public.

Alongside cash, a digital pound would help to ensure that central bank money remains widely available and useful in an ever more digital economy, continuing to support UK monetary and financial stability. It would also provide a public platform for private sector innovation, promoting further competition, efficiency and choice in payments. Many other countries are also exploring the issuance of CBDCs.

No decision has yet been made to build or issue a digital pound, but given changes in money and payments, as well as developments in other countries, we believe there is merit in further preparatory work. This work will allow us to build the necessary skills and put in place the technical capability to introduce a digital pound in a timely manner, were the decision made to do so in the future.

The consultation paper sought feedback from the public on a set of design proposals for the digital pound. The Government and the Bank of England are grateful to everyone who provided their feedback, which will be carefully considered during the ongoing design phase. Respondents from a range of industries and organisations were supportive of the design proposition set out in the consultation paper, while many other respondents raised concerns about the implications of a digital pound for access to cash, users’ privacy, and control of their money. The Government and the Bank of England recognise the critical importance of building the public’s trust in a digital pound.

The consultation response sets out commitments that the Government and the Bank of England are making in response to the feedback received in the consultation, including that primary legislation would be introduced before any launch of a digital pound. Today, the Government and the Bank of England are committing that this legislation would include measures to guarantee users’ privacy and control over how to spend their money. The response also reiterates the Government and the Bank of England’s commitment to protect access to cash. The digital pound, issued by the Bank of England, would be a complement to cash and not a replacement for it.

This consultation response sets outs the steps we are taking to reinforce public trust in the design of a digital pound before any decision is made:

Before any launch of a digital pound, the Government have committed to introducing primary legislation. This means that the digital pound would only be introduced once Parliament had passed the relevant legislation. A further consultation exercise would be held prior to the introduction of legislation.

Privacy, and preventing Government programmability, would be a core design feature of the digital pound issued by the Bank of England.

The Government and the Bank of England would not access users’ personal data, and legislation introduced by the Government for a digital pound would guarantee users’ privacy. Today, the Bank of England is committing to exploring technological options that would prevent the Bank from accessing any personal data through the Bank’s core infra- structure.

The Government and the Bank of England would not program a digital pound, and legislation introduced by the Government for a digital pound would guarantee this.

The Government have already legislated to safeguard access to cash, ensuring that it would remain available even if a digital pound was introduced.

The feedback to date will help to inform our work on the design of the digital pound. We will continue to engage with parliamentarians, the private sector, civil society, academia and the public to develop our proposals for a digital pound, so that we are prepared, should a decision to build a digital pound be taken in the future.

The document is published online at:

https://www.gov.uk/government/consultations/the-digital-pound-a-new-form-of-money-for-households-and-businesses.

Copies of the document are also available in the Vote Office.

[HCWS210]