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A short while ago the UK Treasury and the Bank of England announced the formation of a task force meant to look into the viability of introducing a CBDC. The aim here is likely to create a stronger foundation for the pound and improve the UK’s economic situation.
Correctly implementing a CBDC could offer major improvements to the country’s payments and taxation systems. If the government has digital tokens it can allocate them to certain classes of businesses. These tokens can also be used to build smart financial tools, allowing for a more efficient macroeconomic model.
If cash is backed by a blockchain solution, it would open up the avenue for the government to analyze the country’s economic situation and introduce monetary and fiscal adjustments much faster than it is done now (with the average delay with such matters being 1-1.5 years).
A CBDC would also allow governments to perform monetary interventions directly. Today the government needs to issue allocations to commercial banks which then pass it onto high-street banks with the hope that loans are issued to businesses and the public. And there had been cases when a state would issue a support package, and the majority of it settled in the coffers of large funds which used the money for their own investments instead of creating an economic stimulus.
The introduction of a CBDC would help the pound to develop, allowing the UK to gain a technological advantage and drive its economy forward. It could also bring about greater interest towards buying and investing in the pound from non-UK citizens. The logic here is simple – the more attractive the currency looks, the more people will invest and keep their assets in it. This value will, in turn, correlate with the standard of living, improving it for many people.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
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