On 22 June 2023, the Payment Systems Regulator (PSR) published a letter in response to HM Treasury and the Bank of England’s (BoE) consultation on the ‘digital pound’.

In the letter, the PSR sets out the following views:

  • The PSR welcomes the proposal on the potential introduction of a central bank digital currency for the UK (‘the digital pound’).
  • The new technology proposed offers the prospect of a new way of making payments in an ever more digital economy, backed by the knowledge that payment users are using a digital ledger at the BoE. A digital pound could ensure that the payment ecosystem retains access to public money, even as cash usage declines, supporting the UK’s financial stability in a rapidly evolving payments landscape.
  • The digital pound could help improve the resilience and functionality of payment systems, while increasing competitive pressure and promoting innovation, choice and efficiency.
  • The nature of the benefits and costs associated with different use cases are likely to vary. For example, the benefits from wholesale access to a digital pound, such as unlocking more efficient complex contracts and supporting large international payments, are relatively clear. However, realising the full benefits of a digital pound in the context of retail transactions will require a range of additional issues, notably relating to consumer protection, to be tackled.
  • The PSR is working on a series of reforms, including work with the BoE and HM Treasury, that would unlock benefits through greater use of open data, better ways to initiate account-to-account payments, greater consumer protection and improved anti-fraud protection.
  • The digital pound must be technically and strategically coherent with other aspects of the UK’s approach to managing payment systems, and the potential routes to achieve this will depend on design choices with respect to the functionality and characteristics of the new digital currency. In an annex to the letter, the PSR sets out specific considerations to take forward in the next stage of development.