Focus Private stablecoin vs. CBDC: The U.K. is exploring both to see which better serves the public
Andrew Griffith, the U.K.’s Economic Secretary to the Treasury, has reaffirmed the country’s commitment to the development of a stablecoin that could be utilized by banks to conduct wholesale settlements
While speaking at a meeting in Parliament on Tuesday, Griffith said that he wants to see the government “establish a regime, and this is within the FSMB (Financial Services and Markets Bill), for the wholesale use for payment purposes of stablecoins." Griffith added that the government is "a long way down the road with" the plan.
The FSMB is a bill that was introduced to Parliament in July 2022 and is intended to redefine the U.K.’s financial regulation architecture post-Brexit. If passed, the bill will give the country’s financial regulator, the Financial Conduct Authority (FCA), the authority to regulate the cryptocurrency sector, including stablecoins. The bill is expected to be ready for passage by Spring 2023.
The stablecoin discussed by Griffith wouldn’t be issued by the government but rather by a third-party provider, which is what differentiates it from a central bank digital currency (CBDC) like the digital pound.
The country’s finance ministry currently has plans to launch a public consultation on what issuing a digital pound would look like in the coming weeks. But given public policy considerations for an e-pound, a wholesale, private fiat-backed stablecoin would probably get there first, Griffith said.
That doesn’t mean that the government will scrap its CBDC plans. "The consultation is going to say this is an if and not a when. We are not fully into the inevitability of doing this," Griffith told parliament's Treasury Select Committee.
When compared to other countries, the U.K. is in the middle of the pack in terms of the development of its own CBDC and is currently in the research phase.
Griffith noted that the prospect of a digital pound raised a lot of public policy issues, saying "We have got to get them right. I would rather be right than be first. It will be a long lead-time activity." The first use case of a digital pound would probably be in the settlement of wholesale (wCBDC) financial transactions, he added.
The U.K. minister also sought to calm concerns that the creation of a digital pound could be used to create a “surveillance state” where the government can track the spending of its citizens.
According to Griffith, should the government ultimately decide to move forward with a retail central bank digital currency (rCBDC), it will be “a platform model that wouldn't allow the government to know individual transaction data.”
Instead, banks would be in charge of issuing wallets and helping users manage their holdings and transactions.
The government wouldn't have visibility into the actions of end users except under existing measures to protect against money laundering or fraud, he said, adding “The government takes these concerns very seriously and will proceed on a design basis that fully accommodates those concerns about privacy.”
In closing, Griffith noted that the country remains dedicated to becoming a crypto hub despite the struggles of the sector in 2022, calling the industry “potentially disruptive game-changing technology that can challenge but also turbocharge” the financial industry in the U.K.
