British authorities are exploring the possibility of creating a Central Bank Digital Currency, being touted as “Britcoin.”
- It is a step towards future-proofing Pound Sterling (currency of the United Kingdom) against cryptocurrencies and improving the payments system.
- In the wake of declining cash payments in the country partly due to the Corona pandemic, the Bank of England and the Treasury are considering creating Digital Currency.
- The Digital currency, if passed, would exist alongside cash and bank deposits and act as a new form of money to be used by households and businesses in England.
- It would sit at the interface between cash and private payments systems and would not necessarily be based on distributed ledger technology.
- This ‘britcoin’ would be tied to the value of the pound to eliminate holding it as an asset to derive profit.
- The move could have an economic impact in the form of wider investment into the UK tech sector and lower transaction costs for international businesses.
- Britain’s digital currency would be different in a key sense as if passed, it would be issued by state authorities.
Currently, only the Bahamas has such a currency, though China is trialing it in several cities.
- Digital currency is a payment method that is in electronic form and is not tangible.
- It can be transferred between entities or users with the help of technology like computers, smartphones and the internet.
- Although it is similar to physical currencies, digital money allows borderless transfer of ownership as well as instantaneous transactions.
- Digital currency is also known as digital money and cybercash. E.g. Cryptocurrency.