Barclays is investigating a digital pound’s design and potential applications to achieve seamless integration with commercial bank money.
In a recent paper, the bank investigated communication and interoperability to guarantee consistency between the two money forms.
It delineated a focus on three primary use cases:
- Merchant-initiated payment requests
- Person-to-person text payments
- The security of funds for payment upon delivery
These demonstrate the ability of a digital pound to function in conjunction with traditional money, thereby preventing fragmentation and assuring consistency.
Additionally, the paper implies that a financial market infrastructure (FMI) could offer critical services. This would simplify administration for the Bank of England and digital pound providers.
Barclays Investigates Merchant Integration and Functional Consistency for Digital GBP Payments
Additionally, the paper addressed the concept of “functional consistency.” It is dedicated to guaranteeing that digital pounds and commercial bank money function in a manner that is consistent with daily transactions.
This consistency is essential for the prevention of fragmentation in the payments market. Confusion and inefficiency could result from operating various forms of money without it under separate rules.
The bank is also investigating the potential for merchants to incorporate payments into the digital pound system. It explores methods to enhance trust in online and offline payments by securing funds for delivery-based transactions.
This method would improve the security of everyday transactions like that of blockchains. Additionally, it would fortify the system’s resilience to transaction malfunctions and fraud.
UK’s Digital Pound Decision Hinges on Design Phase Insights
The paper also investigated the broader implications for the financial system of the United Kingdom, positing that a well-designed digital pound could stimulate innovation in payment.
A seamless linkage with current financial infrastructure is anticipated by integrating existing systems such as the UK’s Faster Payments Service.
The Bank of England and HM Treasury are currently engaged in developing and investigating a UK Central Bank Digital Currency (CBDC), which will include real-world evaluations to evaluate its practical application.
The decision to proceed with a digital currency will be contingent upon the development of payment systems in the UK and globally and insights from the design phase.
The design phase for the digital pound is expected to extend until 2025–26 if approved, according to projections from the UK Parliament.
