A new consultation paper speaks to two groups: the general public, and banks, in hopes of putting off fears.
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First of all, the Bank of England would like you to stop calling the digital pound "Britcoin."
Bank of England Deputy Governor for Financial Stability Sir Jon Cunliffe made that very clear — without actually saying the word — in a Feb. 7 speech explaining why the central bank and the Treasury think it is "likely" that a digital pound will be needed before the decade is out.
"There is one important point I should make," he said. "Given all the attention that the cryptoasset world, with its attendant gyrations and failures, has received in recent years, it is perhaps understandable, that the digital pound can be confused in peoples' minds with cryptoassets such as bitcoin."
Saying that "nothing could be further from the truth," Cunliffe added that "cryptoassets are highly speculative assets" that are very volatile and "have no intrinsic value. For that reason, they are not suitable and not used for general payment purposes."
Which is both the core message and why it's a near-certainty that the BoE's central bank digital currency (CBDC) has a new nickname in the press.
While it might or might not use blockchain technology, Cunliffe added:
"The digital pound would be a safe, trusted form of money accepted for everyday transactions by households and firms, in the same way as Bank of England notes are today."
Shaping Opinion
The two government departments' broad opinion is what was leaked on Monday: "It is likely that the digital pound will be needed in the future."
So it said in the forward to its long-awaited consultation paper: "The digital pound: a new form of money for households and businesses?"
However, the paper argued that it is too early to start building the infrastructure for one but not to begin researching it.
Which is in many ways where the U.S. Treasury and Federal Reserve have come down, albeit with a more skeptical undertone. The European Central Bank, on the other hand, is full-out behind a digital euro.
The purpose of the consultation paper is to kickstart a broader conversation.
That begins with what the digital pound would be, at least in current thinking:
"The digital pound, as described in this paper, would have much in common with cash. Like cash, the digital pound would be provided by the Bank; safe, simple, convenient to use; widely accepted; and easily understood. It would be designed for everyday payments, rather than savings and so, like cash, it would not pay interest."
Talking to the Banks
That last part is an attempt to bring private banks onboard, or at least not have them as outright enemies of a CBDC, as they are in the U.S.
The American Banking Association (ABA) and Bank Policy Institute (BPI) responded to a similar consultation paper with a "no" that sounded a lot like "over our cold, dead bodies."
A digital dollar, the BPI said, "could present serious risks to financial stability and may provide few, if any, benefits" and would "undermine the commercial banking system in the United States and severely constrict the availability of credit to the economy."
In the U.K., the paper suggested, people would not be able to hold more than £10,000 or £20,000, and it would not pay interest — again a sop to banks, which tend to fear that in bad times, people would put their money in a CBDC backed by the full faith and credit of the government rather than a savings account that banks could use to make loans.
And the digital pound would be issued by the BoE but reach the public only through banks and other financial institutions.
Talking to the People
Privacy is a big part of the conversation.
In January, Economic Secretary to the Treasury Andrew Griffith pushed that, preemptively promising that a digital point would protect users' privacy.
Still, as the consultation paper makes clear, the conflict between the need for privacy and the requirements of anti-money laundering (AML) rules is something that will inevitably be a big battle. It said:
"The physical, as opposed to digital, nature of cash means that it is harder to make large payments with, or store large amounts of, cash than it is to do the same with digital money, which in itself acts to limit the scale of its use in financial crime. In this regard, the digital pound would be more similar to a bank account than cash and hence it would be inappropriate to allow large-scale anonymous transactions in digital pounds."
More broadly, the consultation paper acknowledges that a digital pound "would require deep public trust in this new form of money – trust that their money would remain safe, accessible, and private." Therefore, it added:
"The journey towards issuing any digital pound therefore necessarily involves an open, national conversation about the future of our money, in parallel with detailed technical consideration by experts across the UK public authorities, and informed by evolving market trends."
But they're never going to escape Britcoin. It's too good a name to pass up.
