Bank of England, HM Treasury, Announce Next Steps on Central Bank Digital Currency

Digital Winston Churchill Pound MoneyA digital pound is taking another step forward, according to a statement by the UK government. HM Treasury and the Bank of England have announced a forthcoming consultation to set out their assessment of the case for a UK central bank digital currency or CBDC. This includes the merits of further work to develop an operational and technology model for a UK CBDC. If any decision is ever made to pursue a CBDC any launch will take place in the second half of the decade if not later.

The consultation, that will take place in 2022, is to be part of a research and exploration phase. To quote the government:

“No decision has been made on whether to introduce a CBDC in the UK, which would be a major national infrastructure project. In April 2021, the Bank and HMT initiated the joint CBDC Taskforce to coordinate the exploration of a potential UK CBDC. The Bank also set up the Engagement and Technology forums, where relevant stakeholders from industry, civil society and academia provide strategic and technical input to the work on CBDC.The 2022 consultation will inform a decision on whether the authorities are content to move into a ‘development’ phase which will span several years. A technical specification would follow the consultation explaining the proposed conceptual architecture for any CBDC. This could involve in-depth testing of the optimal design for, and feasibility of, a UK CBDC.”

Economic Secretary to the Treasury, John Glen, commented:

“This consultation will begin an open discussion on the role a UK central bank digital currency might play in the UK. I’d encourage everyone to contribute to the discussion so we can explore the opportunities this could bring, as well as understanding any risks it may pose.”

Deputy Governor for Financial Stability, Jon Cunliffe, added:

“The plan to publish a consultation next year on CBDC is a crucial step in our policy development, especially as we further our thinking on the pressing issues at hand. What it will do is provide a platform for interested parties and relevant groups to engage with the key questions on the merits of CBDC, and whether the public sector should advance to a development phase.”

The debate is ongoing as to whether a CBDC holds sufficient merits to pursue or whether a CBDC is more of an update on transaction rails and private stablecoins may be the most fortuitous path. Meanwhile, China is already testing a digital yuan, only partially based on blockchain tech, live and in the wild.

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