Money sits at the heart of our economy and everyday lives. Today we can pay in many different ways, including using banknotes issued by the Bank of England or electronically, from your bank account. Whichever way you choose to pay, you can always trust the value of the money you’re spending or receiving.
A digital pound would be like a digital form of cash – a banknote for the digital era. Like banknotes, it would be issued directly by the Bank of England. You could hold your digital pounds in a digital wallet, and spend them in shops or online.
This type of money is known as a central bank digital currency (CBDC). You may also hear it being called ‘digital sterling’ or even ‘Britcoin’. We call the UK version of CBDC a digital pound.
A digital pound would be denominated in sterling and its value would be stable, just like banknotes. £10 in digital pounds would always have the same value as a £10 banknote.
If we introduced it, it would not replace cash. We know being able to use cash is important for many people. That’s why we will continue to issue it for as long as people want to keep using it. You would simply have even more choice when you make payments. The digital pound would not be a cryptocurrency or cryptoasset. As opposed to cryptocurrencies, which are issued privately, a digital pound would be issued by the Bank of England and be backed by the Government.
Just like the money you use today, your trust in a digital pound would be essential. Any future laws on a digital pound would guarantee users’ privacy and also guarantee that neither the Bank of England nor the Government would be able to control how you spend your money. It would be your choice whether to use a digital pound or not.
In early 2023, we published a Consultation Paper, which explores the need for a digital pound and proposes a set of design choices for it. We received over 50,000 responses and we are grateful to all those who provided their thoughts. We published a response to this consultation in January 2024.
How might it work?
A day in the life of a digital pound user
7am
Check your balance on the digital pound wallet.
10am
Buy a cup of tea with digital pounds using your smartphone – just tap it on the same device used for credit and debit cards.
3pm
Pay the electrician in digital pounds – both of you get an instant notification that the payment is complete.
6pm
Order groceries online and pay for them using the digital pound option on the website checkout.
8pm
Transfer money from your bank account into your digital pound wallet.
A digital pound is likely to be needed to fulfil our mission
The way people pay for things is changing. People are not using cash as much as they used to. Digital payments are becoming more common.
There are also new forms of money and new technologies on the horizon. These could help make it easier or quicker to buy the things we want. But some of these could pose risks to the UK’s financial stability.
In light of these trends, the Bank of England and HM Treasury judge there is likely to be a future need for, and benefits from, a digital pound.
The money we issue as the UK’s central bank is the anchor of confidence in our monetary system. This type of money supports the UK’s monetary and financial stability. Today, banknotes are the only type of money we provide for the public to use. Having a digital pound could help us to keep providing this anchor for the UK.
Cash is also very important to ensure people are able to exchange one type of money for another. For example, you can withdraw the money you have in a bank account as banknotes at a cash machine. This is known as ‘uniformity’ of money. Having a digital pound could help us to keep this uniformity in a future where the majority of payments are digital.
The digital pound could also help to improve the options people have for making payments. The model we propose for the digital pound would enable private companies to innovate, make payments more efficient, and give consumers more choice.
You can find out more about our motivations for the digital pound in our Consultation Paper called The digital pound: A new form of money for households and businesses?
The next steps for a digital pound
We haven’t made a decision on whether we will introduce a digital pound.
Work is ongoing in the design phase to develop further the technology and policy requirements for a digital pound. We will undertake experiments with innovative private sector firms to test how it could work in the real world.
At the end of this phase we will make a decision on whether to move into a build phase. Parliament would also have a say before any digital pound is launched, and a further public consultation would be held to make sure you have the opportunity to make your views heard.
What we have published
We have been exploring the digital pound for some time now. In March 2020, we published a discussion paper on CBDC. This outlined one approach to the design of a central bank digital currency. We sought feedback from the payments industry, academics, and other interested parties. You can read a summary of the responses to our 2020 discussion paper.
In February 2023, the Bank and HM Treasury published a consultation paper on The digital pound: a new form of money for households and businesses?
This paper analyses the public policy case for the digital pound in the UK and sets out our proposed design for it. We received thousands of responses from households and businesses. We responded in January 2024.
Response to the Consultation Paper
We also published a Technology Working Paper alongside it. This paper looks at the technical aspects of the model we are considering, including performance, security, resilience and energy use. We responded to this in January 2024.
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We are looking into the digital pound because the way people pay is changing.
We aren't using cash as much as we used to, and digital payments are becoming more and more common.
On top of that, new forms of money are emerging and some of these could pose risks to financial stability.
The digital pound would be like an electronic version of the banknotes issued by the Bank of England.
We think the digital pound could help us maintain trust in money and protect our financial system, while also improving payments by increasing efficiency and enabling innovation.
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We haven't made a decision whether to introduce the digital pound. We're still exploring the possibilities. But if we do decide to issue a digital pound, it won't be for a few years.
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If we introduced the digital pound, it would not replace cash. Instead, we would like it to work alongside cash as we know that people may like to have the option to use both.
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Not in a traditional sense. So you would not be able to open an account with the Bank of England. The way you would access digital pounds would be through a digital wallet provided by a private company. The reason we would do it this way is that we think private companies are much better placed to provide innovative products and services to the public.
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If we introduced the digital pound, you would be able to do the same things you can do with your money today, such as paying family or friends or buying goods in shops or online.
But new technologies are emerging, which we could incorporate into the design of the digital pound. This would allow wallet providers, from whom you would access the digital pounds, to invent and design tools to help you use your money in new ways.
These innovations could change the way people pay and could make payments faster and less expensive.
Wallets would be designed by private companies like banks or payment firms and by new firms appearing over time. But digital pounds would be directly issued by the Bank of England, just like banknotes. That means you would have all the same safety and security that you have with our money today.
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If you used digital pounds, the Bank of England and the government would not collect any of your personal data and wouldn't be able to see how you spent your money. You would access the digital pound through a virtual wallet and you would have to share some personal data with your wallet provider. This is because you would have a commercial relationship with your provider and they would require some form of ID to prevent financial crime or fraud. Your privacy would still be protected by data privacy regulations and your personal data would not be shared with the Bank or the government.
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Neither the Bank of England nor the government would be able to program your digital pounds or restrict how you spent them. However, you would have the ability to program your own payments, if you wanted to.
Today, this would allow you to make automated payments such as paying your rent or mortgage on a set day. But in the future, this feature could also lead to exciting innovations in payments.
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If we introduced the digital pound, we’d ensure it was protected to the very highest standards from things like cyber attacks or power cuts.
Fraud is also a risk people face today when making payments. The authorities and firms providing digital-pound services would have a responsibility to ensure the digital pound helped prevent fraud, as with banknotes. Consumers would enjoy the same protections they have today.
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You wouldn't earn any interest on your digital pounds, just as you wouldn't earn any interest on your physical cash. A digital pound is designed for day-to-day spending and not for savings.
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The digital pound would not be a cryptoasset. You may have heard of cryptoassets such as Bitcoin and Ether. These are issued privately, whereas the digital pound would be issued and backed by the Bank of England. The value of cryptoassets can also be very volatile, which means it moves up and down very quickly at short notice, which means these assets are not very useful for making payments. The digital pound, however, would have a stable value over time. That means that £10 of a digital pound would be the same as a £10 banknote.
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A digital pound wouldn’t be bad for the environment. It would be highly efficient and not use the same energy-intensive methods that you see with the likes of Bitcoin. A digital pound would be in line with the Bank's efforts to reduce its carbon footprint and meet its environmental targets.
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If we introduced a digital pound, we would like everybody to be able to use it, not just those people who are comfortable with technology. Most people would access their digital pounds through a virtual wallet on their smartphone. But we are also looking at other ways too, for example, a physical card like a debit card.
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If we introduced a digital pound, we think we would need to set a limit for how much people could hold. This would give us time to understand its possible impact on the financial system and help us ensure it wouldn't cause disruption.
Once we better understand this and how people use it, we would review this limit. We've not yet decided what the limit would be, but it would be high enough for day-to-day spending. So you would receive all sorts of payments, such as your salary, without worrying.
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We know you may be concerned about how private a digital pound would be. And we know some of you worry that if there was a digital pound, the Government or the Bank of England might try to control how you spend your money.
To address those concerns, the Government has said it would introduce new laws to make sure your privacy and control would be guaranteed.
We are also working on ways to make sure safeguards for your privacy and control are built into the technology of the digital pound, if it goes ahead.
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There would be a vote in Parliament before any digital pound is launched in the UK. That means your local MP would have a vote on the issue.
We started a public conversation on the digital pound in February 2023 by holding an extensive consultation. Tens of thousands of people responded to that, helping us understand how to design a better digital pound for you. And there will be more chances to have your say.
Digital Pound Taskforce
The Chancellor announced the Digital Pound Taskforce (known then as the CBDC Taskforce) as part of the April 2021 Fintech week. This Taskforce brings together HM Treasury and the Bank of England, to coordinate the exploration of a potential UK CBDC. The Taskforce was involved in the Consultation Paper published in February 2023 and the response in January 2024. The Taskforce continues to oversee the Bank of England and HM Treasury during the design phase for a digital pound.
Who we are engaging with
We are speaking to businesses and communities to find out what impact the digital pound would have on them. Together with HM Treasury, we are starting a national conversation to engage everyone on this work.
We are also working internationally with other governments and central banks. For example we have worked with the Bank for International Settlements on projects such as Rosalind, which aims to develop innovate use cases for CBDC. We are also staying in touch with other countries through forums like the G7 and maintaining working relationships with our central bank peers to share information and knowledge.
The work we are doing is supported by the following external forums and groups:
We created the Academic Advisory Group to generate academic input and promote interdisciplinary discussions on a range of topics related to retail CBDC.
The CBDC Engagement Forum looks at all aspects of a central bank digital currency apart from the technology it might use. The forum’s members are senior leaders from financial institutions, civil society groups and merchants, among others.
The CBDC Technology Forum looks at the technology a central bank digital currency might use. It enables us to involve people with a wide range of expertise and perspectives. This helps us to understand the technological challenges of a designing, implementing and operating a CBDC.
Together with HM Treasury, we will form temporary working groups across the design phase to explore individual topics in more detail. These working groups are made up of representatives from a range of organisations whose experience is closely related to their relevant group.
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This page was last updated 25 January 2024