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The UK Treasury has warned that allowing unlimited retail purchases of digital pounds could lead to bank runs if the digital currency becomes widely accepted and used.
In recommendations contained in a consultation paper published on Wednesday, the government said there should be a limit on retail purchases of digital pounds, and that purchases of larger amounts should only be allowed through regulated platforms.
The Treasury also said that digital pound wallets should be subject to anti-money laundering (AML) and counter-terrorist financing (CTF) checks, and that wallets should only be allowed to be opened by those whose identity could be verified through trusted sources.
The consultation paper comes after the Bank of England (BoE) said last month that it was planning to launch a central bank digital currency (CBDC).
The BoE is also exploring the idea of a retail version of its digital currency, which would offer a safe way for people to store and spend digital pound.
However, the Treasury said that the BoE should introduce safeguards to prevent excessive retail use and that’s why it is proposing lower limits for retail purchases.
The government is looking for feedback from the public and industry on its proposals before a decision is taken.