UK Treasury considering plans for digital pound, economic secretary says

Monday, January 16, 2023

Portrait of Griffith taken January 12, 2020.
Image: Richard Townshend.

Andrew Griffith, Economic Secretary to HM Treasury, told members of the United Kingdom House of Commons Tuesday the government was considering a "digital pound", with public consultations on the attributes and regulation of digital assets expected in the coming weeks.

Speaking before Parliament's Treasury Select Committee, Griffith reported the government was "a long way down the road [...] to establish a regime for the wholesale use, for payment purposes, of stablecoins", cryptocurrencies less susceptible to price fluctuations by being pegged to traditional assets.

While affirming commitments for the UK to become a cryptocurrency hub, Griffith said creating regulations for a digital pound would be "a long lead-time activity."

Griffith told the Committee the first use of a digital pound would likely be for settling financial transactions wholesale, but suggested public policy considerations meant a private, fiat-based stablecoin could probably do the job first.

Nevertheless, he said: "We have got to get them [public policy issues] right. I would rather be right than be first".

Griffith expressed the desire that a regulatory regime, Britain's first for crypto assets, would be included in the Financial Services and Markets Bill, which is being debated in the House of Lords. He said embracing "potentially disruptive game-changing technology" could "challenge but also turbocharge" the UK's fintech and financial industries.

Digital currencies are being explored by central banks worldwide, with China testing a digital yuan in major cities like Beijing and Shanghai, and the European Union (EU) due to publish draft legislation to establish and regulate a digital euro later this year.

The European Central Bank is due to complete its two-year investigation phase for a digital euro in July, when it will be followed by three years of implementation.

Consumer protection has come under scrutiny during the 'crypto winter' precipitated by a fall in the value of Bitcoin and the collapse of major exchange FTX. The EU has previously laid out the world's first comprehensive ruleset for regulating crypto markets, which may enter effect in 2024. Griffith indicated the UK's rules could be broader to cover decentralised finance, and that the public consultation over regulating crypto assets would be part of a "research and exploration" phase with the government and the Bank of England.

This includes "at least" six discussions with industry members to "expose us as regulators and decision makers" and uphold Britain's "strong financial reputation".

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