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 UK has taken a tentative step towards creating a ‘Britcoin’ with a taskforce ordered to explore whether the UK should have its own digital currency.
The Bank of England and the Treasury are formally exploring the risks as well as the benefits of the move.
It is a step along the path of creating an e-pound, a kind of digital bank note, which could make transactions quicker and easier and facilitate cross-border payments.
However, unlike cryptocurrencies such as Bitcoin the money would still be issued and backed by the central bank.
The authorities also insist they are still committed to supplying cash to those who need it.
Despite the assurances the step is bound to raise concerns about the future of hard currency – as well as privacy.
One Tory MP told MailOnline the ‘devil is in the detail’ and while it was potentially good news it was also ‘extremely frightening’. ‘The state could end up with a complete audit of everyone’s spending,’ they added.
Digital currencies are already being explored or even implemented in several other countries.
Currently, only the Bahamas has such a currency, although China is trialling it in several cities.
Earlier this 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.
The idea of a central bank digital currency draws inspiration from Bitcoin and other cryptocurrencies, without itself being a cryptocurrency.
Some see the innovation as the only way to stop private currencies backed by tech firms becoming the dominant force in future, as cash slowly falls out of use.
One of the benefits of an e-pound would be as a back-up to card payments.
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.
A digital currency could also be designed to allow tax payments to be made automatically at the point of sale, or in electricity meters which automatically pay suppliers based on power usage.
It could potentially make it easier to pay a few pence to read an individual article on a newspaper website, rather than having to sign up to a monthly subscription.
The new taskforce is part of a series of measures that the Chancellor Rishi Sunak hopes will help the UK’s financial technology sector.
As part of these measures, the Financial Conduct Authority (FCA) will set up a so-called scale box, which would support companies trying to scale up innovative technology.
Despite the assurances the step is bound to raise concerns about the future of hard currency – as well as privacy
The idea of a central bank digital currency draws inspiration from Bitcoin and other cryptocurrencies, without itself being a cryptocurrency
The authority already runs a regulatory sandbox which allows companies to test innovations in the market, on real consumers.
The Chancellor also committed to consult on proposals from a review into how companies list their shares on a public market in the UK.
It will explore ways which would make it easier to supply information on how companies think they will perform financially in the future. Investors are always interested in forward-looking financial information, especially when putting money into companies with high potential for growth.
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.’