The United Kingdom has become the latest country to join the global race for the central bank digital currency or CBDC.
British Finance Minister Rishi Sunak said at the FinTech Industry Conference on Monday said, we are in the process of launching a new task force between the Treasury and the Bank of England to coordinate exploratory work on a potential central bank digital currency.
In a separate statement, the Bank of England said: Such a currency would be a new form of digital money issued by the Bank of England and used by existing households and businesses alongside cash and bank deposits rather than replacing them.
The UK government has not yet decided whether to introduce a digital version of the British pound, but has said: It is exploring the goals, use cases, opportunities and risks involved if they continue.
The Bank of England is also creating a unit within the institution dedicated to exploring the central bank's digital currency. This comes at a time when many central banks are racing to find out their own strategies for central bank digital currencies. The rise of Bitcoin and other cryptocurrencies has given new impetus to such initiatives, as well as the broader trend of declining cash use.
Bitcoin jumped to a record high of $ 64,829 last week before the highly-anticipated appearance in the financial markets of the cryptocurrency platform Coinbase. But the world's most popular digital currency fell sharply over the weekend due to regulatory concerns.
Meanwhile, the sudden rise in the value of the Dogecoin token has led to fears of a potential bubble in the cryptocurrency market. As of Monday, Bitcoin was trading at around $ 56,740, up 3 percent over the past 24 hours.
Another factor pushing central banks toward CBDC is private stablecoin projects such as the Facebook-backed Diem consortium and the controversial digital currency known as Tether. These currencies try to link their market value to some external references, such as the US dollar, to avoid the price fluctuations common in most cryptocurrencies.
China appears to be ahead of other major countries in terms of central bank digital currencies. The People's Bank of China conducted a number of tests for digital currency in major cities, and a senior official said on Sunday that the central bank may test the digital yuan with foreign visitors in the 2022 Beijing Winter Olympics.