Digital Pound to Prioritize Privacy and Operate Pseudonymously, Says BoE CBDC Chief

The Bank of England (BoE) is making significant strides in its central bank digital currency (CBDC) program, with a particular focus on privacy and pseudonymity. Tom Mutton, the head of the fintech and CBDC program at the BoE, recently provided insights into the privacy features of the CBDC and the exploration of alternative ledger technologies.

Mutton revealed that during a recent meeting of technologists hosted by the BoE to discuss the design of the digital pound, there was a divergence of opinion regarding the choice of ledger technology for the CBDC. Consequently, the bank aims to experiment with multiple ledger technologies, including blockchain.

The development plans for the digital pound, known as Britcoin, were initially proposed when the UK Treasury and the Bank established a joint task force to research a UK CBDC in April 2021. In February 2023, the Bank released a consultancy paper outlining the design of the digital pound.

At present, the BoE and the Treasury are soliciting feedback from stakeholders and technology experts on the proposed CBDC design, with the feedback period open until June 30.

Mutton emphasized that the BoE is open to various ledger technologies, recognizing the compatibility with distributed-ledger business models in the private sector. However, the bank remains unconvinced that distributed ledgers offer superior efficiency compared to conventional ledgers.

Regarding privacy, Mutton underscored that the digital pound will prioritize user privacy and avoid collecting personal data. The BoE aims to provide the necessary infrastructure, while private entities will drive innovation in the ecosystem.

“We will have no data on the individual who conducted the transaction. While the wallet provider would possess user data, they will not have access to transaction data without user consent,” Mutton stated.

In this privacy-focused approach, neither the BoE nor the government will have access to user data, and wallet providers will require user consent to store limited data. The BoE has previously indicated that the digital pound could coexist with private stablecoins, as it caters to the retail sector.

CryptoGrafos reached out to the BoE for information on the alternative ledger technologies under consideration, but no response was received at the time of writing.

The BoE’s commitment to privacy and pseudonymity in its CBDC design reflects its recognition of the importance of user confidentiality and data protection in the digital economy.

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