Bank of England set to introduce new ‘Brit Coin’

“As innovation in money and payments accelerates, including through the growth of stablecoins, it is our job to ensure that the public can have the same trust in new forms of money as they do in existing ones,” the central bank said in an accompanying statement on Monday (10 November).

“With that come great opportunities. We are designing a regulatory regime for stablecoins that is fit for the future. Our focus is on possible future use in real world payments and settlements, not their current use to buy and sell cryptoassets.”

The bank noted that the use of regulated stablecoins could lead to faster, cheaper retail and wholesale payments, with greater functionality, both at home and across borders.

It added that it plans to support such a role for stablecoins as part of a ‘multi-money’ system alongside commercial bank money (including tokenised bank deposits), all underpinned by the continued role of central bank money at the heart of the financial system.

“Our regime is designed to maintain financial stability and enable systemic stablecoin issuers to operate viable business models. Alongside granting such issuers access to a deposit account at the Bank, we are proposing that they can hold a portion of their backing assets in short-term UK government debt.”

The BoE said it is also considering putting in place central bank liquidity arrangements to help backstop issuers’ ability to monetise those assets if needed.

“Payments are networks – the more people use them, the more powerful they become. We are therefore keen to work closely with stakeholders to deliver interoperability between systemic stablecoins, traditional and tokenised bank deposits, and central bank money.

“We will take this forward through the Bank’s chairing of the new Retail Payments Infrastructure Board, which is designing the UK’s next generation retail payments infrastructure. We will also explore the roles stablecoins could play in wholesale financial markets via the Digital Securities Sandbox.”

The full consultation document can be found here.

Years in the making

The Bank of England began formal discussion on a digital pound – or ‘Brit coin’ – when it published a consultation paper at the start of 2023, but informal discussions have been taking place for years.

A digital pound would be denominated in sterling and its value would be stable, just like banknotes. £10 in digital pounds would always have the same value as a £10 banknote.

If introduced it, it would not replace cash, the central bank said.

“We know being able to use cash is important for many people. That’s why we will continue to issue it for as long as people want to keep using it. You would simply have even more choices when you make payments.

“The digital pound would not be a cryptocurrency or cryptoasset. As opposed to cryptocurrencies, which are issued privately, a digital pound would be issued by the Bank of England and be backed by the Government.

“Just like the money you use today, your trust in a digital pound would be essential. Any future laws on a digital pound would guarantee users’ privacy and also guarantee that neither the Bank of England nor the Government would be able to control how you spend your money. It would be your choice whether to use a digital pound or not.”

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