The Treasury Select Committee has been fretting over the UK economy for some time now. Since 1981, you might think, but certainly, since the disastrous Truss administration set out to crash the pound a year ago last summer. More recently, however (last month), the Committee anguished over plans for a Digital Currency, so while the US and India have already forged ahead with sandbox initiatives, the UK sat rooted to the sidelines, expressing ever-diminishing interest in a digital pound. December’s Select Committee Report (www.committees.parliament.uk) warned apocalyptically about bank runs, higher interest rates (20% higher), and a wholesale haemorrhaging of personal data, should sterling ever evolve from paper and cupronickel to a digital format…but for goodness sake let’s be honest about this: in our rapidly evolving times, setting your face against digital technology isn’t exactly a ringing endorsement for innovation and competition.
And especially with the UK teetering yet again on the edge of a technical recession, it’s not exactly a position Mr Sunak’s Government should feel comfortable with either.
Despite that, and back in December (when the Committee reported), the Chancellor of the Exchequer (Jeremy Hunt) already seemed content to set up camp with the Luddites. Still, it’s amazing what the imminent prospect of a general election can do: especially when Westminster last week looked over its shoulder and paid closer attention to what’s been happening in Threadneedle Street.
A Multi-Design Choice Digital Currency
The Bank of England has finally published its long-awaited response to the Digital Currency Consultation launched back in February 2023 (www.bankofengland.co.uk/news), and the Governor’s boffins seem to share none of the backward-looking anxiety so evident amongst members of the Select Committee (not to mention those who’ve taken up camp with them).
Instead, the Bank has broadly committed itself to the creation of what it describes as a multi-design choice digital currency, meaning more choice for consumers and businesses, greater market convenience, and, perhaps most importantly, a commitment to technical innovation across an increasingly beleaguered economy. Those, of course, are virtues which India and the United States have been alive to for at least the last two years, so it can’t do any harm for the UK to be getting out of the policy blocks at last. And on a more macro level, the Bank has also emphasised the raw potential of a digital pound to “help strengthen the UK’s position as a competitive global leader in finance”. It’s certainly difficult to argue with that…
On a more cautionary note, the Bank of England also drew attention to the implications of a digital currency for that dwindling number of consumers without access to any digital platform, as well as those worried about the security of their personal data (see above): despite apocalyptic signalling from doomsters on the Select Committee, neither, it found, provides any good reason to sluice the baby out with the bathwater. Instead, primary legislation can (and should) be introduced to guarantee data privacy and cash availability: specifically, the Bank shouldn’t have access to relevant personal data and neither should the Government, and future access to cash should be protected (in line with policy trends already initiated by the FCA).
Although those issues of cash access raise the spectre of the Government’s conspicuous underperformance in guaranteeing availability of rural ATMs, there’s no real reason to question the Bank’s fundamental confidence in its position. There may even, of course, be a different administration at the helm by the time any new legislation is introduced…
Changing Camps
Most of this bodes well for the future of the digital pound, and none of it seems overly difficult, which is no doubt why some members of the Treasury (perhaps Jeremy Hunt amongst them) are already changing camps. Take, for example, the Economic Secretary to the Treasury, Bim Afolami, who was positively gushing:
“We are at an exciting time of innovation in money and payments, and we want to ensure the UK is ready should a decision to build a digital pound be taken in the future. This is the latest stage in our national conversation on the future of our money – and it is far from the last.”
That’s a long way from where the Select Committee found itself last December…and that has to be a good thing.
Red Ribbon Asset Management (www.redribbon.co) aims to harness the full potential of emerging technologies, including digital currencies: working to meet the needs of global communities whilst recognising the compelling importance of Planet, People and Profit.
Executive Overview
Digital Currencies are something of a light-switch issue: on one moment…off the next. But right now, and in the light of last week’s Bank of England Report, they’re definitely “on” in the UK.
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Red Ribbon Asset Management (www.redribbon.co) aims to harness the full potential of fast evolving and emerging technologies to meet the needs of global communities as part of a circular economy, fully recognising the compelling demands of planet people and profit.