‘Britcoin’ not bitcoin? UK considers new digital currency

British finance minister Rishi Sunak told the Bank of England on Monday to look at the case for a new “Britcoin”, or central bank-backed digital currency, aimed at tackling some of the challenges posed by cryptocurrencies such as bitcoin.

A BoE-backed digital version of sterling would potentially allow businesses and consumers to hold accounts directly with the bank and to sidestep others when making payments, upending the lenders’ role in the financial system.

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 (CBDC), Sunak told a financial industry conference.

Soon after, Sunak tweeted the single word “Britcoin” in reply to the finance ministry’s announcement of the taskforce.

Other central banks are also looking at whether to set up digital versions of their own currencies, essentially widening access to central bank funds which only commercial banks can use at present. This could speed up domestic and foreign payments and reduce financial stability risks.

China is a front-runner to launch a CBDC. Last week the European Central Bank said it was studying an electronic form of cash to complement banknotes and coins but any launch was still several years away.

The BoE said a digital version of sterling would not replace either physical cash or existing bank accounts.

The Government and the Bank of England have not yet made a decision on whether to introduce a CBDC in the UK, and will engage widely with stakeholders on the benefits, risks and practicalities of doing so, the BoE said.

BoE Governor Andrew Bailey has previously said bitcoin, the best known cryptocurrency, fails to act as a stable store of value or an efficient way to make transactions, making it ill-suited to serve as a currency and a risky bet for investors.

Central banks also took a dim view of efforts by Facebook to set up its own digital currency.

Even so, cryptocurrencies have received growing interest from mainstream financial institutions, and bitcoin hit a record high of nearly $65,000 on April 14, up tenfold in the space of a year.