It could allow households and businesses to use a central bank digital currency (CBDC) in stores and online.

1

The Bank of England is discussing the use of a digital pound in the future after agreeing it might be necessary.

Both HM Treasury and the Bank have said a digital pound may help when prioritising the public’s access to safe money.

They also agree it could support private sector innovation, choice and efficiency in digital payments.

It’s been announced further research will take place and public opinion is now welcome.

Chancellor of the Exchequer, Jeremy Hunt said: “While cash is here to stay, a digital pound issued and backed by the Bank of England could be a new way to pay that’s trusted, accessible and easy to use.

“That’s why we want to investigate what is possible first, whilst always making sure we protect financial stability.”

Governor of the Bank of England, Andrew Bailey, added: “As the world around us and the way we pay for things becomes more digitalised, the case for a digital pound in the future continues to grow.

“A digital pound would provide a new way to pay, help businesses, maintain trust in money and better protect financial stability.”

What would it look like?

A digital pound will always have the same value as cash, just replicated into digital format, accessed through digital wallets on smartphones or smartcards.

The Bank claims it would be widely available for use, risk-free, convenient and trusted.

It claims the digital pound would be subject to rigorous standards of privacy and data protection too, and that neither the Bank nor the government would have access to personal data.

The idea is for it to be similar to a bank account.

There may be initial restrictions on how much you can spend or hold at once, but that is still to be discussed.

However, the Bank has said there may be a limit at least in the introductory phase.

The digital pound issued by the Bank of England would not be volatile, because it would come from a legislated organisation rather than a private sector.

What are the risks of cryptocurrency?

It’s very important only to invest in a digital pound or any form of cryptocurrency if you understand it.

Remember, there’s no guarantee you can convert cryptocurrency into real cash and investing is not a reliable way to make money.

That’s because it can be highly volatile too – meaning your cash could soar or plummet at any given moment.

Online currency and decentralised finance is also very risky a lot of the time due to the prevalence of scams.

For example, just over 7,200 reports of crypto scams were made to the FCA, the UK’s finance watchdog, in the year leading up to June 30, 2022.

It marks a staggering 45% increase over the previous year, in figures obtained by Capital Block.

Common ways to get scammed are:

• fake exchanges
• fake wallets
• phishing scams
• Ponzi scams where they make unrealistic claims about returns

And keep in mind you won’t be able to take a complaint to the Financial Ombudsman Service, because cryptocurrency firms are not regulated in the way others are.

How to stay safe

There are lots of things to look out for but, most importantly, if something looks too good to be true it probably is.

Always check with a trusted friend if you’re not sure about something as well – they may be able to spot something you haven’t.

Also, don’t always trust a glowing website and perfect reviews – fraudsters can get quite smart with these things.

For more on how to avoid scams, read our guide here.