Global: UK Delays Decision on Digital Pound Amid Privacy Concerns

British authorities have postponed a decision on whether to proceed with a state-backed digital pound, an alternative to bank and tech company-operated payments, until at least next year. The Bank of England (BoE) and the UK finance ministry will continue preparatory work following a public consultation that generated 50,000 responses, many raising privacy concerns.

In a joint statement, the BoE and finance ministry stated, “No final decision has been made to pursue a digital pound – also called a central bank digital currency.” They added that they have progressed to the design phase of work and expect to decide whether to proceed to the build phase around the middle of the decade.

Prime Minister Rishi Sunak initially supported the idea in 2021, urging the BoE to begin work on the project. Even if approved, the digital pound is unlikely to be operational until the end of the decade.

Under the proposals, Britons could hold electronic pounds, equivalent to physical cash, up to a limit of £10,000 to £20,000 ($12,700-$25,400). The money would not pay interest, similar to cash. Banks advocated for a lower limit of £3,000 to £5,000, fearing an outflow of money from standard bank accounts.

British lawmakers recently stated that the case for digital cash had not been made. Privacy concerns are also a challenge for other central banks, including the European Central Bank and the U.S. Federal Reserve.

The UK asserts that a digital pound would be private but not anonymous, unlike physical cash. Authorities would be able to track transactions suspected of money laundering or financing terrorism, similar to existing bank accounts and credit card payments.

The BoE and government assured that a digital pound would not replace cash, preserving the public’s access to an anonymous payment option. With the use of physical cash dwindling in the UK, a state-backed digital option could provide alternatives to existing bank payments or separate payment systems developed by large tech companies. If the project proceeds, legislation will be implemented to ensure privacy, with further public consultations planned. The digital currency would not permit the government to programmatically block specific transactions, addressing concerns raised by privacy advocates.