The introduction of a digital pound in the U.K. will necessitate new laws or amendments to existing finance and data rules, according to two lawyers. With the Bank of England and the U.K. Treasury currently seeking public feedback on the design of a digital pound, it may be a few years before a decision is made on issuing a central bank digital currency (CBDC). However, should the U.K. decide to implement a CBDC, new legislation defining the characteristics of a digital pound and modifications to current data, privacy, and anti-money laundering regulations are required.
Louise Abbott, partner at U.K.-based Keystone Law, discussed the necessity of new legislation, as there is currently “no such thing” as a central bank digital currency in the country. George Morris, partner at Simmons & Simmons, supported Abbott’s statement. While the European Union plans to publish a bill outlining the details of a digital euro this year, the U.K. has traditionally addressed crypto assets by extending existing frameworks to cover digital assets. This approach is likely to be applied to the digital pound as well.
In progressing to phase two of their digital pound work, the Treasury and the Bank of England aim to develop the model of the digital pound in both policy and technology terms. According to Abbott, the legal framework for a digital pound should cover issues such as ownership and security, with amendments to all financial laws necessary to accommodate the CBDC.
Existing U.K. anti-money laundering rules and payment regulations, along with privacy and data laws could require amending in light of a digital pound, as stated by Morris. In a recent digital pound debate, questions were raised regarding the Treasury’s methods of ensuring privacy and liberty in relation to the digital currency.
Economic Secretary, Andrew Griffith, addressed these questions, highlighting the importance of balancing freedoms with the duty to protect citizens from fraud and other concerns. As private firms are expected to function as digital pound wallet providers, the consultation emphasizes that these firms should comply with data protection laws and use people’s data fairly.
However, concerns have arisen about tracking individuals’ financial activities with the use of a digital pound. Morris stated that ensuring people’s concerns are addressed may involve specific amendments to the Data Protection Act 2018 in relation to the government’s handling of data pertaining to the digital pound. Implementing these changes could increase public comfort and uptake in using the digital currency.
Source: Coindesk
