A digital pound is likely to be needed in the future, according to a new consultation paper published by HM Treasury and the Bank of England this week.

The government department and central bank are currently consulting on a central bank digital currency (CBDC) which would be issued by the Bank and used by households and businesses for everyday payments in-store and online.

The government said that a decision about whether to roll out a digital pound would likely be taken "in the middle of the decade" and will mainly be based on future developments in money and payments. The earliest the digital pound could be launched would be sometime after 2025.

The Bank of England’s deputy governor Jon Cunliffe said there would be a cap of £20,000 per person if the plans for a digital pound are carried out, according to a report by Reuters.

“While cash is here to stay, a digital pound issued and backed by the Bank of England could be a new way to pay that’s trusted, accessible and easy to use,” said chancellor of the exchequer, Jeremy Hunt. “That’s why we want to investigate what is possible first, whilst always making sure we protect financial stability.”

The Bank is now carrying our further research and development work, while the public is being invited to give their views on the scheme.

“As the world around us and the way we pay for things becomes more digitalised, the case for a digital pound in the future continues to grow,” said Andrew Bailey, governor of the Bank of England. “A digital pound would provide a new way to pay, help businesses, maintain trust in money and better protect financial stability.”

The Bank has assured the public that the needs of vulnerable people are being considered in the digital pound design process to make sure that it would be "simple and straightforward" to use.

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