UK Digital Currency On the Way…Slowly
Posted by Colin Lambert. Last updated: November 10, 2021
The UK Treasury and Bank of England have unveiled the next steps on their exploration of a central bank digital currency (CBDC) for the UK, although any actual launch will not be before the second half of the decade “at the earliest”.
The CBDC would, the authorities say, exist alongside cash and bank deposits, rather than replacing them. In 2022, they will launch a consultation which will set out their assessment of the case for a UK CBDC, including the merits of further work to develop an operational and technology model for a UK CBDC. It will evaluate the main issues at hand, consider the high-level design features, possible benefits and implications for users and businesses, and considerations for further work.
“This consultation will form part of a ‘research and exploration’ phase and helps to inform policy development over the next few years,” the Treasury and BoE say.
The authorities stress that 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 Treaury 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 authorities say the 2022 consultation will inform a decision on whether they 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.
“If the results of this ‘development’ phase conclude that the case for CBDC is made, and that it is operationally and technologically robust, then the earliest date for launch of a UK CBDC would be in the second half of the decade,” they state.
“This consultation will begin an open discussion on the role a UK central bank digital currency might play in the UK,” says 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.”
Deputy governor for financial stability at the Bank of England, Jon Cunliffe, adds, “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.”