Digital pound: Govt to introduce measure for privacy protection
The Bank of England announced on January 25, 2024, that UK financial authorities would not be able to access the data of the holders of the digital pound.
The central bank and the HM Treasury confirmed that the government would introduce legislation for “guaranteeing user privacy and control” if the UK eventually implements its on-development digital pound crypto asset.
As years go by, the government has become more proactive in regulating crypto assets and their accompanying blockchain platforms. Over 3.3 million people in the UK invested in cryptocurrency, according to a 2023 report. The popularity has triggered the emergence of new crypto companies, including tokenisation platforms like the NYALA Digital Asset Platform.
The digital pound is an effort by the UK government to take control of this nascent sector. It aims to complement the existing physical pound.
Digital pound project
The digital pound has been in development by the Treasury since January 2023 as a new form of money for households and businesses. However, the UK government had to spend months before making the latest announcement on the project due to privacy concerns.
“We are at an exciting time of innovation in money and payments, and we want to ensure the UK is ready should a decision to build a digital pound be taken in the future,” said Bim Afolami, the economic secretary to the Treasury.
Although The Bank of England and the Treasury have not announced the finalisation of the project in upcoming months, both institutions said the digital pound is likely to materialise in due course.
Blockchain trade body CryptoUK said it welcomed the privacy guarantee positively. However, the trade body criticised the lack of clarity and direction for the digital pound’s implementation, which can lead to frustration and uncertainty for the UK’s digital asset landscape.
Sandbox for emerging technologies
In another development, the UK government announced the Digital Securities Sandbox (DSS) in December 2023, which allows companies to experiment with emerging technologies in securities market infrastructure under government regulations.
The Bank of England and its Financial Conduct Authority (FCA) will manage and oversee the sandbox. According to the government, businesses can test ledger technology and tokenize securities on the sandbox’s blockchain.
“It will enable participating entities to be subject to modified legislative requirements, where the existing requirements act as a barrier or an obstacle to using new technology,” said the DSS explanatory memo.
According to the sandbox’s regulations, business entities participating in the sandbox must follow a schedule of “disapplied and modified legislation.” It means that they can test the emerging technologies inside the sandbox as long as the government allows them.
However, the DSS is still open for further changes and adaptation by taking input from various parties. Current feedback for the sandbox emphasises the need to improve several aspects, such as the application process, the management of limits within the DSS, the interaction between activities inside and outside the DSS, and how to exit the sandbox.
In addition, several parties also raised some legal issues during the consultation for the DSS. All in all, digital asset owners must wait until the government decides to implement the sandbox or change it further to keep up with trends.