The inevitability of a digital pound has been steadily increasing for years and with the news from the Bank of England (BoE) now going public with a firm statement of intent and consultation process, some form of British digital currency is looking inevitable.

This heralds a seismic change to our everyday financial dealings, from buying a cup of coffee to trading and the transfer of wages. By asking the right questions, we shine a light into the digital wallet, outlining prospective proposals, timescale and implications, and busting some myths along the way!

Digital Pound

What Is A Digital Pound?

A proposed digital version of banknotes, replicating the role of cash in a digital world, to be used by households and businesses alongside existing forms of sterling. This is not a cryptocurrency, like BitCoin or Ethereum, which are more accurately described as investments, and subject to fluctuations in value. The digital pound (already nicknamed “Britcoin”) would be a central bank digital currency (CBDC), issued by the BoE, and pegged to the value of the pound.

How Will It Work?

UK residents will be allocated a ‘digital wallet’, with the facility to hold digital pounds up to a certain limit (currently propose at £10,000 or £20,000). These anonymised accounts would be administered by commercial banks and other financial institutions, with the BoE administering an encoded central ledger recording each person’s fluctuating ownership of digital pounds.

Issued and guaranteed by the BoE, just like physical sterling, digital pounds could be transferred, spent and used by households and businesses for a myriad of everyday payments using familiar and new methods including cards, apps, contactless, or payment services such as PayPal.

Will I Be Forced To Give Up Cash?

To coin a phrase (pun intended), reports of the death of cash have been greatly exaggerated, and the BoE are keen to assure that the digital pound would not replace cash. Both iterations of sterling would work alongside each other, allowing for personal choice and circumstance. However, with cash transactions dropping from 55% to 15% in the last decade, and certain businesses proactively choosing to go cashless, the introduction of the digital pound certainly can’t be seen as a shot in the arm for cash.

How Secure Will It Be?

The digital pound, says the BoE, will be “subject to rigorous standards of privacy and data protection”. Those few words cover the vast amount of security and technology that will be required. However, with ever-increasing alternative currencies, 114 countries worldwide are actively exploring the potential of a CBDC, with four already operational (Bahamas, Jamaica, Nigeria and the Eastern Caribbean). The European Union is due to publish a draft legal framework for a potential digital euro this May.

Are There Any Potential Benefits For Me?

Simplicity, flexibility, security over cash and reduced fees are all being heralded by digital currency advocates like the Digital Pound Foundation. Payments from a personal digital wallet should be speedy and confirmed immediately. With the potential for many bank fees to be eliminated at a stroke, personal and business benefits could be significant. Overseas travel and trading could benefit from substantial reductions in foreign currency exchange charges, overseas card or ATM fees, fees for sending or receiving money and other transactions.

Are There Any Further Concerns?

Plenty, including security, data protection, civil liberties, vulnerability to internet connectivity, the current political administration and legal system at any time. The radical centralisation of data required means the BoE could theoretically view the whereabouts and transitions of all digital money. A digital currency opens up the possibility of state interference in personal spending, for example the potential to prevent future welfare payments being spent on gambling. In more prosaic terms, commercial banks, faced with losing fees at a stroke while being tasked with administering digital wallets, could seek to recoup by levying new transaction fees. The complexity of the proposition is why we are currently at the start of an initial consultation period.

What Happens Next – How Can I Stay Involved?

The BoE has launched a 2-3 year design phase, looking into technology and policy requirements. Together with the Treasury, it has also launched a digital pound consultation paper, with views welcome from individuals, businesses and organisations. You can read the consultation paper, and have your say, via the Bank of England or websites. The consultation closes on 7 June 2023.

Positive consultation would initiate the build phase, aiming to launch the digital pound in the second half of this decade, relatively short notice for such a radical change. At ICS Accounting, our expert team will be closely monitoring every development, implication, and opportunity for personal, business, contactor and employer finances, ensuring our clients are in the best position to benefit whatever follows.

For no-obligation advice, or to discuss your individual requirements with one of our friendly team of experts, simply call 01524 580720, or email