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The UK's digital pound project is an opportunity to create "a new form of currency that is preferred for global digital transactions", an industry leader has claimed.
Verdian sees CBDCs as a way to upgrade money to meet the needs of our society and economy, which are becoming progressively more digital.
Major central banks, including the Federal Reserve, the Bank of England (BoE), and the People's Bank of China, have begun to develop CBDCs as an answer to the blockchain innovations like bitcoin and ethereum.
Verdian believes that it's high time for the next stage of the evolution of money. He stated: "The current form of money is not fit for purpose. And we should have the opportunity to evolve it to be something that is fit for the future and appropriate for a digital society." He insists that this isn't just a theoretical solution, but a response to real demands from consumers and businesses.
The UK's digital pound project
The implementation and testing of CBDCs are under way with projects like Project Rosalind, in collaboration with the Bank of England (BoE) and the Bank for International Settlements (BIS).
The BoE aims to decide on the implementation of a CBDC by the end of the decade. This doesn't mean that a direct CBDC would be released by the central bank to consumers, but rather a new form of money for commercial banks to embed within their core banking systems, thereby offering new products and payment methods that traditional electronic money cannot support.
Verdian sees the UK's digital pound project as an opportunity for innovation. "With the digital pound project, there is an opportunity for us to be innovative and be agile and provide a new form of currency that is preferred for most global digital transactions," he added.
The UK's CBDC project, called the digital pound or 'Britcoin', is currently in its development phase. It would be issued by the BoE and backed by the government, as opposed to a privately issued cryptocurrency, like ethereum.
The emergence of programmable money
Verdian emphasised the importance of the evolution from traditional forms of money to digitised, programmable money.
Using blockchain-based technology, CBDCs, and tokenised bank deposits, Verdian notes, "we're able to code logic into money to automate a lot of things, to get it to do new types of payments, new types of lending, new types of products".
This innovation provides banks the opportunity to revolutionise their offerings, creating payment products that streamline and simplify financial interactions for both businesses and consumers.
Verdian also highlighted the importance of privacy and regulation in this new financial landscape. He referred to BoE deputy governor Jon Cunliffe's April statement that this new form of money would be private but not anonymous and would align with existing banking regulations.
"The government has the powers, the regulation, the laws that law enforcement can ask for data," Verdian added. He explained that the introduction of programmable money would not change this fact. The significant change lies in the opportunity for central banks to better understand and manage systemic financial risk.
Programmable money: A step forward in consumer convenience
Programmable money takes a leaf from the book of internet technologies, replicating the logic and programmability that we are already familiar with. "Using internet technologies that we have at our fingertips, we can actually apply that same type of logic to money for the first time," Verdian said.
He described a specific use-case for programmable money. "For example, you are expecting a delivery and you've already paid the supplier. But when it arrives, it is the wrong delivery, and then you have to go and get a refund. There's a lot of friction, a lot of pain points.
"But with a programmable money, you can programme in that if the delivery arrives on time, is the right size, and the correct goods that were ordered, then the funds are released," he explained.
In another instance, Verdian explained how direct debits could be managed more efficiently. With programmable money, one can automate the process such that when salary comes in, mortgage and utility bills are paid off immediately, preventing potential overdrafts.
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