Bank of England favors cautious approach to digital pound launch

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Bank of England shifts focus to digital payments

Highlights

The BOE sees no immediate need for Britcoin.
Sterling stablecoins gain regulatory attention.
Payment upgrades could enable 24/7 settlement.

Speaking at the International Monetary Fund's annual meeting in Bangkok, Breeden indicated that the proposed digital pound, commonly called Britcoin, may not be needed immediately, Bloomberg reports. Her remarks point to a more measured approach after several years of work examining whether Britain should introduce a digital version of central bank money for everyday payments.

Stablecoins and tokenized deposits offer alternatives

The Bank of England has explored a retail digital currency as cash becomes less important in daily transactions. Central bank money, primarily physical cash in the retail economy, now accounts for about 8% of payments, compared with roughly two-thirds two decades ago.

That shift has raised questions about whether the public needs direct access to central bank money in digital form. However, commercial banks and payment companies are developing alternatives that could support faster transfers without requiring the central bank to issue a new currency.

Stablecoins are digital tokens designed to maintain a fixed value against conventional currencies. Tokenized deposits represent commercial bank balances on digital infrastructure, potentially allowing payments and financial transactions to settle more efficiently.

Breeden favors a system in which cash, bank deposits, stablecoins, and any future digital pound can be exchanged at equal value. Such an arrangement would preserve consistency across different forms of sterling while allowing payment technologies to develop.

Bank of England upgrades settlement infrastructure

Rather than prioritizing Britcoin, the central bank is modernizing its Real-Time Gross Settlement system, which processes payments between financial institutions.

The upgrade is intended to support tokenized transactions while retaining central bank money as the underlying settlement asset. This could enable continuous, near-instant settlement without introducing a separate retail digital currency.

The Bank of England also wants British companies to develop sterling-denominated stablecoins, reducing dependence on dollar-based alternatives.

Sterling stablecoins become a regulatory priority

The central bank anticipates that three major sterling stablecoins could emerge, each attracting approximately £40 billion in demand. That prospect makes supervision increasingly important as private digital currencies become more widely used.

The Bank of England is expanding its regulatory capabilities to ensure stablecoins maintain reliable value and can operate within the broader payments system.

For banks and payment providers, the approach creates opportunities to develop digital sterling products without waiting for Britcoin. For consumers, the eventual outcome may be a wider choice of payment methods rather than a new currency issued directly by the central bank.

The decision to launch a digital pound remains open, but its urgency now depends partly on how successfully private alternatives develop.

Earlier, we reported that the UK gave the Bank of England a new digital payments innovation mandate.

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