Bank of England announces next steps for UK CBDC

The Bank of England and HM Treasury have announced they will launch a new consultation to explore the potential for a UK Central Bank Digital Currency (CBDC.)

The CBDC, which would exist alongside cash and bank deposits, would act as a new form of digital money and be issued by the UK central bank.

The consultation, which launches next year, will inform a decision on whether the authorities are content to move into a ‘development’ phase which will span several years. Following the development phase, if the case for a CBDC is made, the Bank said that the earliest date for launch would be in the second half of the decade.

The consultation will set out assessment of the case for the digital asset, including the merits of further work to develop an operational and technology model for a UK CBDC.

It will evaluate the main concerns about the introduction of a UK digital currency, consider the high-level design features, possible benefits, and implications for users and businesses, look at the considerations for further work, form part of a ‘research and exploration’ phase, and help to inform policy development over the next few years.

"This consultation will begin an open discussion on the role a UK central bank digital currency might play in the UK,” said John Glen, economic secretary to the treasury. "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.”

Last month, the Bank of England’s deputy governor for financial stability warned that while crypto technologies offer a prospect of radical improvements in financial services, they could pose financial stability risks in their current form. This cautious narrative has been repeated consistently by the Bank of England and other UK financial bodies over the past year.

“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,” said Jon Cunliffe, deputy governor for financial stability at the Bank of England. “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.”

At this stage, no decision has been made about whether or not a CBDC will be introduced in the UK.

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.

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