The Bank of England (BoE) and the United Kingdom’s Treasury are gearing up plans to create a digital currency that could “provide a new way to pay” without necessarily replacing cash.
On Feb. 7, a joint consultation paper on central bank digital currencies (CBDCs) is set to drop, with the BoE and Treasury seeking feedback on how — and if — they should proceed with building a CBDC.
In a Feb. 6 public statement, Finance Minister Jeremy Hunt indicated that the two entities would seek to develop a modernized digital payments system that doesn’t necessarily negate the use of cash.
“While cash is here to stay, a digital pound issued and backed by the Bank of England could be a new way to pay that’s trusted, accessible and easy to use,” he said, adding that “we want to investigate what is possible first, whilst always making sure we protect financial stability.”
Another key area of focus will be to provide a government-backed alternative to privately issued stablecoins, with officials from the BoE and Treasury expecting Big Tech companies to develop such in the coming years.
As part of the statement, BOE Governor Andrew Bailey emphasized that a “digital pound would provide a new way to pay, help businesses, maintain trust in money and better protect financial stability.”
“However, there are a number of implications which our technical work will need to carefully consider. This consultation and the further work the bank will now do will be the foundation for what would be a profound decision for the country on the way we use money.”
BoE Deputy Governor Jon Cunliffe is also set to give a speech on Feb. 7 to update the finance industry on the central bank and Treasurys’ CBDC work so far.
If they decide to move forward, it was suggested that the digital pound and its underlying blockchain-based system would not be built until at least 2025.
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In April 2021, current prime minister and former finance minister Rishi Sunak directed the BoE and Treasury to collaborate and form the Central Bank Digital Currency Taskforce. Essentially the duo is tasked with overseeing the study and potential implementation of the digital pound.
While it appears to have been a slow burn so far, given how cautious the BoE and Treasury's stances are, the latter did post a job listing to LinkedIn on Jan. 24 calling for a team lead for its Payments and Fintech Team of roughly 20 people focused exploring on a “potential digital pound.”