The government will set up a new task force to examine the possibility of the UK’s own digital currency.
The new task force is part of a series of measures that Chancellor Rishi Sunak hopes will help the UK financial technology sector.
The Bank of England and the Treasury Department will jointly examine the objectives of establishing a central bank digital currency, as well as the risks and benefits.
It is a step towards the creation of an e-pound, a type of digital banknote.
However, authorities said they were still keen to provide cash to those who need it.
Digital currencies are being studied in several countries and implemented in some cases, which could benefit the way cross-border payments are made and also benefit from an overall decline in cash payments.
China is currently testing a similar idea in several cities, while such a currency is currently only available in the Bahamas.
The idea of a digital central bank currency is inspired by Bitcoin and other cryptocurrencies without being a cryptocurrency itself.
One of the benefits of an e-pound would be securing card payments.
Last week, the head of the Swedish central bank said the country could have such a digital version of its currency by 2026, while the head of the European Central Bank said an electronic euro could be created within four years.
Currently, customers can alternatively turn to cash when they find themselves in a store where the card machines are no longer working. However, as cash use becomes rarer, fewer than one in ten payments in the UK are expected to be made with paper money by 2028 – its place as a contingency for electronic payment systems will decline.
A digital currency could be another contingency system, according to a report from the Bank of England last year.
It would also provide another way to pay online when cash cannot be used.
Mr. Sunak said, “Our vision is for a more open, greener and more technologically advanced financial services sector.
“The UK is already known for being at the forefront of innovation, but we have to go further. The steps I outlined today to boost growing fintechs, push the boundaries of digital finance, and make our financial markets more efficient will drive us forward.
“And if we can harness the extraordinary potential of the technology, we will cement the UK’s position as the world’s leading financial center.”