Barclays considers the use of a digital pound for UK

Barclays is considering the use cases for a digital pound and how it might benefit the United Kingdom.

The British banking giant outlined in a recent report how a digital currency could work alongside traditional finance to boost payment systems across the nation.

The 333-year-old institution is one of the biggest companies in the UK with a market cap of around $32 billion.  Barclay’s exploration of a digital currency comes as governments around the world are looking into central bank digital currencies (CBDCs), with the Bank of England currently designing a possible UK CBDC.

The latest research paper focuses on communication and interoperability to ensure smooth transactions between fiat currency and the proposed digital currency. The authors, employees of Barclays, also identified three key use cases for the digital point: personal payments, merchant payments and secure transactions.

The report authors write: “We conclude that a financial market infrastructure (FMI) providing specific capabilities could simplify the experience of ecosystem participants, simplify the operating platforms for both the Bank of England and digital pound Payment Interface Providers(PIPs), and facilitate the creation of innovative services.”

The debate around the merits of a centralized digital pound is still ongoing within the Bank Of England. The central bank is expected to make a decision on the issue within the next two to three years.

Barclays, along with the Bank of England and HM Treasury, envisions a digital pound as a means to ensure the UK’s financial system remains compatible with a digital future. In 2021, the country’s financial services sector contributed £173.6 billion to the UK economy, 8.3% of all economic output.

Although no final decision has been made, the government recognizes that the use of cash is declining while digital payments continue to rise. A digital pound would provide secure, central bank-backed money in a more digital economy, complementing current payment options while maintaining the stability of the UK’s monetary system.

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