Britcoin is getting closer: The United Kingdom is already working on its CBDC

In the coming years we will witness the birth of digital money and the residual use of cash. This is the roadmap set out by the various central banks around the world, including the Bank of England, which has just announced the creation of Britcoin, a digital pound in the early stages which will not be launched until 2026 in the best case scenario. It is not alone as many countries are starting to develop their own central bank digital currency (CBDC).

The steps that the Bank of England is going to follow are clear: an initial consultation phase and a subsequent study period. As announced by the Bank, the consultation phase will be open until 7 June 2023 and will seek to gather the opinions of different individuals, companies and organizations to determine the next steps towards the launch of the “digital pound”.

At the end of this period, a new phase will begin which will last “two or three years”, according to the Bank of England. The technological and political requirements of Britcoin will be studied during this design phase. This does not mean that the digital currency will become a reality immediately, as it will be subject to the conclusions drawn.

“If the results of this phase show that the digital pound is justified, we will move to the construction phase. The earliest date for the issue of the digital pound would be the second half of the decade”, commented the Bank of England.

The British government itself has launched the key points for understanding what this digital currency issued by the central bank would be and how it would work. The first thing to understand is that this currency is the digital equivalent of traditional money in value and security. “10 digital pounds would always be worth the same as 10 pounds in cash”, the Government assured. Also, they will be issued and backed by the monetary authority.

Regarding accessibility, they would be accessed via digital wallets offered by the private sector through telephone apps or debit cards.

The main novelty would be the purpose of this digital pound. The use of this new money would be focused on payments instead of savings, “without interest on holdings”, the Government added. The most striking aspect of this currency is that it will be introduced with “initial restrictions on how much an individual or a company could have”.

According to the consultancy PwC, 80 % of central banks worldwide are planning to launch a digital currency in the coming years. For now, the most advanced projects are the eNaira of the Central Bank of Nigeria and the Sand Dollar, which was issued in 2020 by the Central Bank of The Bahamas as legal tender.

Of the largest central banks, China already carried out tests with the digital yuan in 2020 and is currently testing pilot models in different cities around the country.

As for the United States, at the end of 2022, the Federal Reserve Bank of New York began a first phase of tests called Project Cedar, in which Citigroup, Mastercard and WellsFargo are participating. Its intention is to deploy a digital dollar pilot project, as announced by Reuters and the NY Fed itself.

Russia and Japan also have pilot projects in progress to analyze the feasibility of digitizing their fiat currencies through CBDC.

Finally, in the European Union such a currency is in the research phase, which began in October 2021 and will finish in October 2023. Once concluded, the European Central Bank will decide on whether to implement and develop this digital version of the euro. According to the ECB, “we are working with national central banks in the euro area to investigate whether to introduce a digital euro, an electronic equivalent to cash. It would complement notes and coins, giving people an additional option on how to pay”.