The Bank of England (BoE) has been actively working on its central bank digital currency (CBDC) program, making significant progress in its development. Tom Mutton, the director of fintech at the BoE, recently discussed the privacy aspect of the CBDC and why the central bank is considering alternative options to blockchain as the underlying technology.
During a meeting of technologists organized by the BoE to discuss the design of the digital pound, there was a clear disagreement among participants regarding the choice of ledger for the CBDC. In response, the bank plans to conduct trials using multiple ledger technologies, including blockchain.
The initiative for a digital pound, referred to as Britcoin, was initially proposed when the U.K. Treasury Department and the BoE established a joint task force to explore the possibility of a U.K. CBDC in April 2021. In February 2023, the bank released a consultancy paper outlining the proposed design of the digital pound.
These developments indicate the BoE’s commitment to exploring the potential of a central bank digital currency and its efforts to carefully consider various technological options to ensure the privacy and effectiveness of the digital pound.
The Bank of England (BoE) and His Majesty’s Treasury are currently soliciting feedback from stakeholders and technology experts on the proposed design of the central bank digital currency (CBDC). The feedback period is open until June 30.
Regarding the choice of ledger technology for the CBDC, Tom Mutton expressed that the BoE aims to be compatible with distributed-ledger business models in the private sector. However, he mentioned that the efficiency benefits of distributed ledgers over conventional ledgers were not entirely convincing to the bank. While the BoE did not respond to specific inquiries about other ledger technologies under consideration, it is actively exploring various options.
In addition to the ledger technology discussions, Mutton addressed the privacy aspect of the CBDC. He emphasized that the digital pound would prioritize user privacy and would not collect personal data. The focus of the bank would be on providing the necessary infrastructure, while private entities would be responsible for driving innovation surrounding the CBDC.
According to Tom Mutton, the director of fintech at the Bank of England (BoE), there will be strict privacy measures in place for the digital pound. Mutton clarified that the BoE and the government would not have access to any user data associated with the digital pound. While wallet providers may have limited access to user data, they would require explicit user consent to store any data. The BoE’s focus on the retail sector also implies that the digital pound could coexist with private stablecoins, providing additional options for users in the digital currency landscape.
Frequently Asked Questions (FAQs):
1. What is the central bank digital currency (CBDC) program of the Bank of England (BoE)?
The CBDC program of the Bank of England involves the development and exploration of a digital currency issued by the central bank. The BoE is actively working on its CBDC, also known as the digital pound or Britcoin, to assess its potential benefits and design.
2. Why is the BoE considering alternative options to blockchain for its CBDC?
The BoE is considering alternative options to blockchain as the underlying technology for its CBDC due to a clear disagreement among participants in discussions about the choice of ledger technology. To address this, the bank plans to conduct trials using multiple ledger technologies, including blockchain.
3. What is Britcoin, and when was it proposed?
Britcoin is the nickname for the digital pound, the proposed CBDC for the United Kingdom. The initiative for a digital pound, referred to as Britcoin, was initially proposed when the U.K. Treasury Department and the BoE established a joint task force in April 2021 to explore the possibility of a U.K. CBDC.
4. How is the BoE ensuring privacy in its CBDC?
The Bank of England is prioritizing user privacy in its CBDC. According to Tom Mutton, the director of fintech at the BoE, the digital pound will not collect personal data, and the BoE and the government will not have access to any user data associated with the digital currency. Wallet providers, although they may have limited access to user data, would require explicit user consent to store any data.
5. What is the feedback period for the proposed design of the CBDC?
The feedback period for the proposed design of the central bank digital currency (CBDC) is open until June 30. The Bank of England and His Majesty’s Treasury are soliciting feedback from stakeholders and technology experts during this period.
6. Will the digital pound coexist with private stablecoins?
Yes, according to Tom Mutton, the BoE’s focus on the retail sector implies that the digital pound could coexist with private stablecoins. This would provide additional options for users in the digital currency landscape, allowing for a diverse range of digital currency choices.
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