Cashless Society: UK Chancellor Plans To Replace Cash With Official Digital Currency

Britcoin digital currency

Britains’s Chancellor of the Exchequer Rishi Sunak is planning to replace cash with official digital currency in what Treasury insiders have described as the ‘biggest upheaval in the monetary system for centuries’

The move would see the Bank Of England establish a direct digital equivalent to physical money and take control of it in the same way as sterling.

The Mail Online reports: Its supporters in the Treasury say that it would allow the Bank to give the economy a boost in times of financial crisis by paying the ‘Britcoins’ directly into people’s bank accounts.

It could also slash the cost and time it takes to make payments online and transfer money around the banking system.

Britcoin could also cut banking costs dramatically for small firms. However, critics warn that a digital version of the pound could lead to greater financial instability – making it harder for the Bank to regulate the economy with monetary policies such as setting interest rates.

There are also fears the introduction of Britcoin would lead to higher loan and mortgage rates as millions of people switched cash to central bank digital currency, eating into the amount of money high street banks have on deposit to lend to borrowers.

A taskforce of Treasury and Bank officials set up to examine the merits of Britcoin – known as the Central Bank Digital Currency – is expected to report to Mr Sunak by the end of the year.

The Treasury is understood to be more keen than the Bank of England on the idea of creating an official British digital currency to compete with the rise of Bitcoin because they are wary of the huge numbers of people piling into cryptocurrencies. Some investors have lost vast sums as the price of Bitcoin has gyrated wildly.

Meanwhile, other countries are racing to develop their own digital currencies. China has been testing a digital yuan; US Treasury secretary Janet Yellen has hinted that a digital dollar could be created; and the European Central Bank is investigating plans for a digital euro. Unlike Bitcoin and other cryptocurrencies, Britcoin would be linked to the value of the pound and backed by the central bank. That, in theory, should stop it from swinging massively in value.

Under plans being considered by officials, consumers might be able to hold the currency in accounts directly linked to the Bank of England. Officials are undecided on whether to attach interest rates to Britcoin, which might make it attractive to savers as an alternative to cash.

Retailers and other companies could accept the digital currency for ordinary payments that customers would otherwise have made with a debit or credit card.

But the amount of money each individual could hold in Britcoin is likely to be limited initially. Crucially, consumers would be able to change pound Sterling into Britcoin with ease. It would also be made very simple – and very fast – to transfer Britcoin back into ordinary cash that could be taken out of an ATM. That might help avoid the type of long queues that occurred when thousands tried to get their money out of Northern Rock in 2007.

A digital currency where customers have accounts directly linked to the Bank of England would also make it far easier to issue so-called ‘helicopter’ money, where funds are injected into people’s pockets by the Government.