As Bitcoin powers on, UK Finance Minister announces plans to launch the country's own digital currency

The United Kingdom has joined a global race towards creating a central bank digital currency (CBDC) amid this year's massive boom of cryptocurrencies, especially Bitcoin which reach an all-time-high of almost $65,000 last Wednesday.

CNBC is reporting that the UK Finance Minister Rishi Sunak, made the announcement at a Fintech industry conference today.

“We’re launching a new taskforce between the Treasury and the Bank of England to coordinate exploratory work on a potential central bank digital currency,”, said Sunak.

A separate statement by the Bank of England said that the new digital currency would be a “new form of digital money issued by the Bank of England and for use by households and businesses. It would exists alongside cash and bank deposits, rather than replacing them."

"The Taskforce will be co-chaired by Deputy Governor for Financial Stability at the Bank of England, Jon Cunliffe, and HM Treasury’s Director General of Financial Services, Katharine Braddick."

While there is speculation that it could be a digital version of the British Pound, no official decision has been made yet. But the Bank has stated its intent to explore and study the  “objectives, use cases, opportunities and risks” involved if it were to proceed.

UK Finance Minister, Rishi Sunak
Source: FT

With this move, Britain is only the latest in a long list of many other countries that are currently developing their respective central bank digital currencies. So far, China appears to be at the front of the line. Already, they have carried out a number of tests with their digital yuan in major cities, signifying that they are already at a very advanced stage in its development.

In fact, just yesterday, a Chinese top official disclosed that they could trial the digital yuan with foreign visitors during the 2022 Olympics in Beijing.

Apart from China and the UK, Central Banks in many other countries are also actively exploring and/or developing their own digital currencies as well.

CNBC cites a study published earlier this year by the Bank of International Settlements about its latest survey showing that 86% of the 65 central banks it spoke to are doing some form of work on central bank digital currencies (CBDCs), be it research, proofs of concept or pilot development. And almost 15% are moving toward actual research for pilots.

Deputy Governor of the Bank of Italy, Piero Cipollone, told CNBC that the increased focus on CBDCs stems from the general move away from cash, adding that “this could undermine one of the basic functions of the central bank.” 

He said that “in an environment where cash is used less and less by both the customer and the merchant because the whole ecosystem is shifting towards (being) digitalized ... you want to replace the functionality of cash with something that is digital but is as conceptually as close as possible to cash.”

This latest Bitcoin boom has seen major global businesses, including Tesla, PayPal and others, announcing their adoption of the crypto asset as a means of payment for their products and services.

Sources: CNBC, Bank of England