The government is considering introducing a “digital pound”, the economic secretary to the Treasury has told MPs.
The UK was committed to becoming a world crypto hub, Andrew Griffith said.
And the government was “a long way down the road… to establish a regime for the wholesale use, for payment purposes, of stablecoins”.
Stablecoins are designed to have a predictable value linked to traditional currencies or assets such as gold.
The currency, for use by households and businesses, would sit alongside cash and bank deposits, rather than replacing them.
‘Game-changing technology’
A public consultation on the attributes of a digital pound would be launched in coming weeks, Mr Griffith told the Treasury Select Committee.
“I want to see us establish a regime, and this is within the FSMB [Financial Services and Markets Bill, currently being debated in Parliament], for the wholesale use for payment purposes of stablecoins,” he said.
Central banks around the world are developing or exploring digital currencies.
China, for example, is a front-runner in this global race, and is in the process of testing a digital yuan in major cities including Beijing, Shanghai and Shenzhen.
The European Central Bank in July 2021 took a first step towards launching a digital version of the euro, kicking off a 24-month investigation phase to be followed by three years of implementation.
And Mr Griffith told the committee: “It is right to look to seek to embrace potentially disruptive technologies, particularly when we have such a strong fintech and financial sector.”
He wanted to allow the opportunity for this “potentially disruptive game-changing technology that can challenge but also turbocharge all of those [financial] industries”, he said.
Consumer protection
The “crypto winter”, a rapid decline in the value of Bitcoin and other assets has intensified concerns about whether any cryptocurrency can ever be considered stable.
It also has the potential to raise many public-policy issues.
There will also be a public consultation on Britain’s first general regulatory approach to crypto assets, a sector where consumer protection has come under scrutiny in recent weeks.
But the consultation will form part of a “research and exploration” phase and will help both the Bank of England and the government develop the plans over the following few years.
When it came to regulating crypto, Mr Griffith told the committee, being right was more important than being first, given the UK’s “strong financial reputation”.
“It will be a long lead-time activity,” he said.
‘Right balances’
The EU has set out the world’s first comprehensive set of rules for regulating crypto markets.
They are due to receive final approval in the coming weeks and come into effect in 2024.
Mr Griffith said the UK rules could be broader, to include decentralised finance, and everyone would benefit from greater transparency.
“We want the right regime, operated in the right way, that has the right balances in it,” he told the committee.
He also committed to hold “at least” six roundtables with those in the crypto industry, to “expose us as regulators and decision makers”.
Tulip Siddiq, Labour’s shadow City Minister, acknowledged the importance of The Bank of England exploring the potential benefits of a Central Bank Digital Currency.
She said, “A Labour government would be serious about attracting FinTech companies to the UK, by building a regulatory regime that supports innovation to safely harness new technologies and our ambition to make Britain the homegrown start-up hub of the world.”
