UK Finance proposes £5,000 limit for digital pound

United Kingdom Economy


  • UK Finance proposes to limit individual holdings of the digital pound to £5,000 to mitigate the risks of bank runs.
  • The organization argues that the UK authorities have yet to clearly define the objectives and needs that the digital pound must meet.
  • A final decision on the CBDC in the UK is expected by 2025.

Earlier this year, the Bank of England and the UK Finance Ministry published a consultation document for the design of a central bank digital currency (CBDC).

Officials noted that a digital pound could be launched in the second half of this decade to prevent the fragmentation of an electronic cash system currently dominated by the world’s biggest banking and technology institutions.

On July 4, UK Finance, an organization representing UK-based banks and finance companies, gave its opinion on this matter. The organization proposed that individual holdings of the proposed digital pound should be limited to £3,000-£5,000 to avoid panic and the risk of bank runs.

Need for clear objectives for the digital pound

UK Finance’s suggestions follow initial recommendations by the UK government and central bank to impose a temporary limit of £10,000-£20,000 to help banks prevent deposit flight.

However, the financial organization argued that the limit should be significantly lower, citing risks that the digital pound could exacerbate runs on deposits in times of financial turmoil.

In addition, the group argued that the UK authorities have yet to clarify “clearly what are the objectives and need that the digital pound is expected to meet and why it is the best option to meet those needs. It is not clear from the consultation what place digital central bank money is expected to occupy in the market.”

The final decision in the hands of the UK authorities

UK Finance is one of the largest financial membership organizations in the world. It acts as a collective voice for more than 300 leading firms in the sector, including major banks such as Barclays, HSBC, Lloyds Banking Group, NatWest, Halifax and Santander, among others.

The digital pound also referred to as “Britcoin”, represents an attempt by British authorities to issue a secure form of digital cash that discourages consumers from using private sector stablecoins like the failed Libra project launched by Facebook in 2019.

The UK Treasury and central bank are still exploring potential uses for a CBDC, with a final decision expected to be made in 2025.