Bank of England thinks digital pound can co-exist with private stablecoins

The United Kingdom is a step closer to launching a Central Bank Digital Currency (CBDC) after releasing a consultation paper explaining the proposed digital pound, which the public has nicknamed “Britcoin.”

The 116-page consultation

Other programmability features including smart contracts and atomic swaps — which enables assets to move across networks — will be enabled.

While the paper states the private sector would help build such infrastructure, it also considers imposing individual limits between $12,000 (£10,000) and $24,000 (£20,000) to essentially prevent its use as a savings account:

“A limit on individual holdings would be intended to manage those risks by constraining the degree to which deposits could flow out of the banking system. That is important during the introductory period as we learn about the impact of the digital pound on the economy.”

Privacy concerns that many in the crypto community have voiced were also acknowledged. Without going into detail, the paper stated an e-GBP would be subject to “rigorous standards” of privacy and data protection.

It further explained that users will “have at least some level of privacy” because transactions will be recorded anonymously on the core ledger.

Related: Bank of England governor questions need for digital pound

The paper outlined, however, that an e-GBP may impact the business models of commercialized banks through what is known as “bank disintermediation” — where fewer deposits are made into commercial banks.

“The digital pound would not fundamentally alter the traditional channels of money creation, but it might affect monetary stability. […] Bank disintermediation might affect the transmission of monetary policy to the real economy,” the consultation paper stated.

The central bank also believes the digital pound could bring about more financial inclusivity amongst the U.K. population.