Lobbyists in the UK advocate for interoperability between the Digital Pound and cryptocurrency.
Lobby groups and crypto companies in the UK generally support the government’s plans for a digital pound, but some believe that the currency should be interoperable with crypto to be suitable for the future. The government proposed a “platform model” where the Bank of England would provide infrastructure for a central bank digital currency (CBDC) and allow private companies to integrate and provide wallets to connect to other services. Responses to the government’s plans are now coming in, with crypto industry stakeholders concerned about privacy preservation and if a digital pound will be designed in an innovation-friendly manner. The BoE has proposed a limit of 10,000 to 20,000 digital pounds per individual for at least the introductory period of the CBDC, and some lobby groups have urged the government to consider a lower limit. The digital pound system might also enable offline payments, but this could result in complexities that affect system security and performance. Some argue that a digital pound would be even more innovative and “future proof” if it worked with crypto. Lobby groups also said that they wanted the digital pound to be used globally.
Privacy concerns
Stakeholders who responded to the digital pound plans have urged the government to be cautious, especially in terms of ensuring privacy. There have been debates among lawmakers on how to ensure privacy with a digital pound. Five stakeholders, including CryptoUK and IRGS, have agreed with the government’s proposal that the Bank of England should not have access to users’ personal data. Jannah Patchay, executive director of the Digital Pound Foundation, said that she believes the bank’s proposed model respects the need for privacy and people’s desire to keep their transactions private from the government and central bank. However, not everyone agrees that the government’s proposed approach to preserving privacy, by anonymizing payment messages instructing transfers on the core ledger, would be enough. Riccardo Tordera-Ricchi, head of policy at The Payments Association, said in a statement that some members are not comfortable with the central bank being able to view even anonymized transactions and wallet balances. He added that those who are skeptical of the central bank’s and the government’s motives might argue that advances in data analysis will enable such data to be interpreted and abused, perhaps through a combination with other data sources, including geolocation or tax and benefits data. Although a decision on issuing a digital pound is not expected until at least 2025, if the government goes ahead with the plan, ensuring sufficient public understanding and trust in any future digital pound will be crucial to its success, according to Cameron.
Read more: UK Will Need New Laws to Accommodate Future Digital Pound, Lawyers Say
Edited by Sandali Handagama.