The Bank of England (BoE) has announced a new initiative to explore central bank digital currencies (CBDCs) tailored for retail applications. This move, detailed in a discussion paper released today, reflects the BoE’s commitment to keeping pace with evolving payment technologies and addressing associated risks.
The discussion paper highlights the importance of central banks engaging proactively with innovations in the financial sector. It emphasizes that central banks must rapidly adapt to these changes and prepare for their potential impacts.
In addition to CBDCs, the BoE’s experimental program will incorporate distributed ledger technology (DLT). The rise of cryptocurrencies and the DLT that underpins them has prompted central banks globally to investigate how these advancements can be integrated into their systems.
The BoE’s experimentation will focus on achieving specific policy outcomes through innovations in wholesale central bank money. The program will evaluate both wholesale CBDCs (wCBDCs) and synchronization methods, comparing the advantages of each approach.
Synchronization would enable communication between two distinct ledgers, facilitating the earmarking of funds and the settlement of payments. Meanwhile, wholesale CBDCs, which are digital tokens issued by central banks for use exclusively by financial institutions, could enhance interactions with programmable platforms.
To ensure seamless integration across different forms of currency, both digital and traditional, the BoE will collaborate with the Treasury, the Payments Systems Regulator, and the Financial Conduct Authority.
The BoE has been investigating the viability of a CBDC since at least February 2024. As previously reported by PYMNTS, a formal consultation commenced on February 7 to establish guidelines for introducing a UK CBDC, referred to as “Britcoin,” digital sterling, or digital pound. The earliest anticipated rollout for this digital currency is set for 2025, with a potential launch by the end of the decade contingent upon the outcomes of the consultation.
In April, the BoE expanded its CBDC project team by 30 members, as reported by The Times. Ian Taylor, an advisor to the trade association CryptoUK, remarked on the significance of this addition, stating, “A team of 30 seems like quite a significant resource to focus on the digital pound. It shows the impact it would have, and that the bank is serious about it.”
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