Digital pound: A reality?
The UK government has reaffirmed its commitment to developing the nation into a global centre for cryptocurrencies and is thinking about introducing a “digital pound.” According to Andrew Griffith, the Treasury’s economic secretary, a public consultation on the proposed national currency will begin in the coming weeks, according to the BBC. With Griffith telling the Treasury Select Committee: “I want to see us establish a regime, and this is within the [Financial Services and Markets Bill], for the wholesale use of stablecoins for payment purposes, the current government, which is Conservative, doesn’t seem to be very conservative about this.”
Stablecoins are a type of cryptocurrency asset whose value is intended to be fixed to the value of fiat money or other assets. It should be noted that stablecoins, like other crypto assets, have the potential for dramatic collapse, as we saw with Terra USD last year.
Griffith stated that “central banks throughout the world are developing or researching digital currencies,” which is undoubtedly accurate. “It is appropriate to seek out and welcome potentially disruptive technology, especially given how powerful the fintech and banking sectors are here.”
The use of phrases like “game-changing technology” and “turbocharging” existing financial industries may have been well-received in the past, but after the events of 2022 in the crypto market, many have become skeptical of such language. There is currently a focus on regulation rather than immediate adoption and the UK is lagging behind Europe in this area. This can be attributed to the effects of Brexit, as the EU has already established comprehensive regulations for crypto markets which are expected to take effect in 2024.
Andrew Griffith, the Economic Secretary to the Treasury, acknowledged the current regulatory state of crypto markets in the UK and suggested that the future regulations could be more extensive and clearer in their nature. To that end, a public consultation will be conducted in the near future to gather insights on the UK’s future approach towards regulating crypto markets. However, it should be noted that the government is currently in the research and exploration phase and it could be a few years before any tangible results or changes are seen. Griffith mentioned that the government wants to ensure the right regulatory framework is in place and that the balance of the regulations are appropriate. The process of creating these regulations is expected to be a long one, as the government wants to ensure that the UK’s strong financial reputation is upheld.
Andrew Griffith stated that the UK government’s strong financial reputation is a major factor to consider when creating regulatory framework for crypto markets and it will be a long-term effort to ensure that everything is done right. He added that the government wants to establish a regime that operates in the right way, with the right balances in place. However, it is worth noting that the government’s recent performance on various issues like Covid and strike action have caused some doubts about its ability to handle this matter effectively. Nonetheless, there is still hope that they will get it right. It is worth mentioning that the EU has been moving faster in this area of regulation, creating a comprehensive set of rules for crypto markets which will come into effect in 2024, providing a good example for the UK to follow. Additionally, the United States has also been exploring the regulation of crypto markets with the President Joe Biden ordering government agencies to start producing reports and exploring the possibility of a “digital dollar”. The use of stablecoins that are pegged to the USD, it may also lead to the creation of government-issued digital dollar, which could lead to a significant shakeup in the market. The Digital pound seems quite likely.
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