Britcoin: The future of currency in the UK?

With official talks surrounding the new digital currency commencing in early February, the proposed idea hopes to have a basis to work from within the next four months or so. These talks would produce a ‘digital pound’ that would be issued by the Bank of England, accessible via digital wallets and interchangeable with current central bank-backed currencies like cash.

What exactly is ‘Britcoin’?

Whilst the preferred correct name given to the currency by the Bank of England is the ‘digital pound’, ‘Britcoin’ has become its popular title adopted by the masses. Put simply, Britcoin is a potential British digital currency that, unlike typical cryptocurrencies such as Bitcoin or Ethereum, would be directly tied to the pound – also known as a ‘stablecoin’. £20 in Britcoin would have a one-to-one value with a £20 note for example. This would make Britcoin a central bank digital currency (CBDC).

However, just like existing cryptocurrency, these digital pounds would be built using the blockchain, put into a token, and stored in digital wallets. It should be emphasised that the Treasury made clear that any digital currency would coexist alongside cash and bank systems today, instead of replacing them.

What’s the big idea?

Since its reveal, many people have been asking why? Why do we need such a thing and why do the central banks seem to like the idea so much? After all, the UK isn’t on its own in this venture, with around 100 countries globally considering the creation of their own CBDC.

The key factor attracting central banks to the idea of their own central bank digital currency is the decentralised nature of the growing current cryptocurrency market. If cryptocurrency is the future of currency and widespread decentralised crypto adoption occurs, then central banks could be left in the dust. This would mean the central banks losing control over the supply of money and payment systems, putting the entirety of financial and monetary stability at risk as well as giving them almost no control over their national economies.

At the same time, a CBDC would enable central banks to have even more power than they currently do. The regulatable and programmable nature of a digital currency allows for a lot of flexibility when it comes to controlling its use, the market it is in, as well as direct control of things like interest rates. It is for these reasons that CBDCs are so popular with the central banks.

How will it be used?

Just like the tried and tested cash and card, this new form of currency would be used in the exact same way, for typical day-to-day spending. Making payments to friends or family, making online purchases, or even just a quick trip to the shops for some snacks are all under the umbrella of usage for this new digital currency. However, unlike traditional banks, Britcoin is not intended to be used as a method of saving your money, but this is conditioned to change based on its potential popularity looking forward.

Another application for the currency in the online space would be micropayments. As the name implies, these are payments of a small amount of money and would be made drastically simpler and more effective via a digital currency transaction.

An additional application that would help thousands of people in the UK is Britcoin’s ability to simplify and reduce levy costs of cross-border payments. Typically, these would be overseen by high street banks who would apply hefty levy charges to them, however with a centralised digital currency this additional hassle and cost would be removed.

When could we see its introduction?

There’s plenty to weigh up before Britcoin can be introduced carefully and calculatedly. If handled poorly it could result in another wave of economic turmoil for the UK, but this is something that the Bank of England is more than aware of. The consultation which commenced in early February is predicted to take around four months to complete, followed by a design phase which could take the next two years at a minimum.

Once all of the design and consultation are finalised and a significant investment is made to propel the digital currency into the limelight, we could not only be seeing but be actively using Britcoin come the end of the current decade.