Several proposals are being considered by the government, including the introduction of a "digital pound," according to the Treasury's economic secretary.
According to Andrew Griffith, the UK intends to become a world leader in the cryptocurrency industry.
There was a long way to go before the government would establish a system allowing stablecoins to be used wholesale for payment.
As the name implies, stablecoins are designed so that their value is predicted over the long term based on assets such as gold or other traditional currencies.
Rather than replacing cash and bank deposits, this currency is intended to sit alongside them for use by households and businesses.
Technology with 'game-changing' potential
In a recent statement, Mr. Griffith told the Treasury Select Committee that he would launch a public consultation in the next few weeks. This consultation would cover the attributes of a digital pound.
During the discussion on the FSMB [Financial Services and Markets Bill, which is currently being debated in Parliament], Griffith said that he wanted to establish a regime where stablecoins can be used wholesale as payment methods.
Digital currencies are being developed or explored by central banks around the world.
China, for example, has been seen as one of the front-runners in this global race for the digital yuan and is currently testing it in cities such as Beijing, Shanghai, and Shenzhen as part of their economic development plan.
The European Central Bank took the first step towards the launch of a digital version of the euro in July 2021. It noted that the research phase would last for 24 months, following which the implementation phase would last for three years.
Mr. Griffith told the committee that it was pertinent to emphasize embracing potentially disruptive technologies. This is especially true when such a vibrant fintech and financial sector is available on our doorstep.
According to him, he would like to allow technological advancement to be a game changer. This will challenge and potentially turbocharge all of these industries within the financial sector.
Protection of Consumers
In recent months, there have been increasing concerns about whether bitcoin or any other cryptocurrencies can ever be considered stable because of the "crypto winter," a rapid decline in the value of Bitcoin. Many public policy issues can be raised by it as well.
As part of the public consultation, Britain will also unveil its first general approach to the regulation of crypto assets in the next few weeks. In recent weeks, consumer protection has come under heavy scrutiny in this sector, which could negatively impact consumers.
The consultation will be the first stage in a long process of "research and exploration" and the Bank of England and the government will be working together to develop a detailed plan over the coming years.
A recent report from the Royal Institution of Chartered Surveyors said that the UK has a 'strong financial reputation.' Therefore, it is more important to be right than to be first when it comes to regulating crypto.
Griffith said that the project is envisaged as a long-term project.
Achieving the Right Balance
There have been numerous developments lately regarding regulating cryptocurrency markets, one of them being enacted by the European Union.
It is expected that the final approval of these regulations will occur within the next few weeks, and they will be put into effect in 2024.
It has been suggested that the UK rules could be broader to include decentralized finance, enhancing transparency and benefiting everyone in the process.
Griffith told the committee that what they want is a system that is operated in the right way and has a balance that helps it function.
Furthermore, he has committed to holding "at least" six roundtables between the regulators and those in the crypto industry to enable the regulators to get a better feel for the industry.
Earlier this year, Labour's shadow City Minister, Tulip Siddiq, explained how crucial it is for the Bank of England to explore the potential benefits of a Central Bank Digital Currency that would make it easier for banks to be more competitive.
The Labour Party would take a concerned interest in attracting FinTech companies to the UK by establishing a regulatory framework that is designed to encourage innovation. This will enable them to harness advanced technologies safely. The Party would also seek to make Britain the homegrown start-up hub of the world through its ambitious plan.
