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UK to Explore Digital Pounds and Establish Stablecoin Regulations

Cointime Official

Jeremy Hunt, the Chancellor of the Exchequer, announced in a written statement that the UK government will begin exploring a central bank digital currency in the coming weeks, a digital pound could be released by The Bank of England as part of the effort.

According to Jeremy Hunt, to support innovation and leadership in emerging areas of finance, the UK government will embrace and facilitate the adoption of cutting-edge technologies. "[The government is] Bringing forward a consultation in the coming weeks to explore the case for a central bank digital currency – a sovereign digital pound – and consult on a potential design. The Bank of England will also release a Technology Working Paper setting out cutting-edge technology considerations informing the potential build of a digital pound.", said Jeremy Hunt.

Apart from the potential launch of  digital pound, Jeremy said the UK government is currently "legislating in the FSM Bill to establish a safe regulatory environment for stablecoin". Stablecoins could be used for payments and the UK goverment needs to ensure it has the necessary powers to bring a broader range of investment-related cryptoasset activities into UK regulation.

Furthermore, the UK government is setting up a Financial Market Infrastructure Sandbox in 2023, and is legislating to implement this in the FSM Bill. This will enable firms to test and adopt new technology and innovations, such as distributed ledger technology, in providing the infrastructure services that underpin markets, Jeremy said in his statement.

"[The government is] Publishing its formal response to the consultation on expanding the Investment Manager Exemption to include cryptoassets, which will facilitate their inclusion in the portfolios of overseas funds managed in the UK. The government intends for this change to be made through HMRC regulations this year." Jeremy added.

However, many sides still have questions and doubts about digital pounds. For example, in a report ‘Central bank digital currencies: a solution in search of a problem?’ published by The Economic Affairs Committee in January 2022, the Committee concludes there is no convincing case for why the UK needs a central bank digital currency (CBDC). The committee found that while a CBDC may provide some advantages, it could present significant challenges for financial stability and privacy protection.

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