What does the Digital Pound Foundation work towards, and why was it formed?

“The Digital Pound Foundation (DPF) was incorporated in June 2021 and formally launched in October 2021. We are a member-led organisation advocating for the development of a well-designed digital Pound in both public – ie central bank digital currency (CBDC), and private – ie stablecoin, forms. We aim for a diverse, effective, and competitive ecosystem for these new forms of digital money. Our members include Accenture, AvaLabs, Billon, CGI, Clifford Chance, Electroneum, Modulr, Quant and Ripple.” 

“We advocate and provide constructive input on vital considerations such as privacy, financial inclusion, and technology inclusion, and consider the digital Pound’s role in enabling the UK’s transition to a digital economy and underpinning a more efficient, sustainable payments and financial markets infrastructure.”

“Our goal is to act as a catalyst to explore and articulate the case for a well-conceived digital pound among stakeholders across the public and private sectors. Our work will progress through to regulatory engagement and industry testing, via support for practical sandbox experiments, proofs-of-concept, and pilot work, as needed. The DPF will support and complement other projects and associations that have similar objectives, including the Bank of England’s consultation framework and Engagement and Technology Forums, existing industry associations, and private sector initiatives.” 

We heard at AFME that 35% of banks are working on CBDCs. Do you see this number increasing in the near future?

“In terms of central banks, we see this number increasing significantly over the coming 12-18 months. There are numerous retail CBDC programmes currently in progress in places as diverse as the European Union, Canada, Hong Kong, Sweden, Singapore, Cambodia and China. The Bahamas has become the first nation to launch a Retail CBDC, and China’s DCEP (Digital Currency / Electronic Payments system) is in live commercial trials at scale, with the country intimating that it will fully launch in the near future. Experimentation is also progressing apace on the wholesale CBDC side in jurisdictions such as Singapore, Switzerland and France, with many of these also looking at the potential for cross-border wholesale settlement of both payment v payment and delivery v payment trades.” 

Will cash disappear and CBDCs become the future of payment, or is the role of digital currencies to complement cash?

“Access to public money is of fundamental importance to maintaining trust within the UK’s financial system, and public money also represents a fundamental expression of the relationship between a nation and its inhabitants. Despite the rise of commercial bank money and the corresponding decline in its usage, cash remains an intrinsic part of the money ecosystem, and millions of UK citizens still depend on using it for many reasons. Ultimately, public money represents the only fully accessible and inclusive form of money that we have. As physical cash use declines, the case for introducing a digital alternative to publicly issued cash, whilst not necessarily supplanting cash in its entirety, grows ever stronger.” 

“Access to public money is of fundamental importance to maintaining trust within the UK’s financial system, and public money also represents a fundamental expression of the relationship between a nation and its inhabitants.”

Jannah Patchay, Policy Lead, Digital Pound Foundation

“A radical shift towards greater use of private money could result in a system where some members of society are left behind due to the focus of the private sector on more commercially advantageous customers. Financial inclusion remains a key priority area for the Bank of England, and maintaining access to public money is a means of ensuring that such policy objectives can be delivered. Public money also represents a fundamental policy implementation and delivery mechanism for the UK government (across use cases ranging from benefits delivery to tax collection), which could be strengthened in the future through the introduction of a functionally-rich CBDC.”

“As a digital form of public money, a CBDC could have significant benefits for the public, and act as a potential differentiator and accelerator of innovation for a global UK. Unlike cash, a digital CBDC could enable micropayments or otherwise be ‘programmed’ for specific uses to support government aims, including macroeconomic and social policy delivery, and to facilitate an improved transactional relationship and experience between individuals, businesses, and the state. Accessing digital money usually requires no more than a smartphone. This type of technology could bring many of the unbanked or underbanked into the UK’s financial system for the first time.” 

How do you see the synergy between publicly and privately issued digital currencies?

“While we believe that the public should continue to have access to public, central bank-issued money, we also believe in the importance of providing consumers with choice. Privately issued digital currencies, such as stablecoins, may be designed to provide functionality and associated benefits that a CBDC cannot, or that are not necessarily desirable in a CBDC.”

“We also fully acknowledge and support the need to have appropriate safeguards in place to ensure that privately issued coins and stablecoins do not destabilise the financial system. The DPF anticipates a rise in privately-issued tokenised sterling currency in the form of stablecoins or e-money tokens. A regulated form of systemic stablecoin, issued by regulated entities, fully redeemable by users, and interoperable with both existing and other new forms of digital money, will be important to the UK, as the programmable nature of stablecoins can deliver greater operational efficiencies and foster innovation in the payments space.”

“A digital pound will form part of the foundational infrastructure that will underpin the UK’s transition to a digital economy, as well as provide a platform for future innovation and leadership on the world stage.”

Jannah Patchay

“The Digital Pound Foundation is committed to supporting the development of a well-designed digital Pound. This might be in public (central bank-issued) or private (privately issued stablecoins) form, and most likely a combination of the two – and an effective and diverse ecosystem for these new forms of digital money in the UK. A digital pound will form part of the foundational infrastructure that will underpin the UK’s transition to a digital economy, as well as provide a platform for future innovation and leadership on the world stage.” 

“There is undoubtedly value and benefit to be gained, for all sectors of society and the economy, from having a diverse, competitive, and well regulated environment for private issuers of digital money or “systemically important stablecoins”, as they are frequently termed by regulators and central banks. However, there is also a continued role to be played by access to public, central bank-backed money, and our view is that the future of public money lies in a CBDC.”