UK CBDC could be in use before 2030

The Bank Of England (BofE) and UK Treasury say they are looking at the case for developing a digital pound. 

In a Consultation Paper and video published on the BofE website this week, the central bank said it was exploring the possibility of launching a central bank digital currency (CBDC) which would be known officially as the digital pound. 

It explained that the value of digital currency would always be the same as cash and would not be a cryptocurrency or cryptoasset. 

“The digital pound would be a new form of sterling, similar to a digital banknote, issued by the Bank of England,” says the Consultation Paper. “It would be used by households and businesses for their everyday payments needs. It would be used in-store, online and to make payments to family and friends. If introduced, it would exist alongside, and be easily exchangeable with, cash and bank deposits.”

After the high-profile collapse of cryptocurrency exchange FTX last year, and widely publicised volatility in the crypto markets in general, the central bank will be looking to reassure the public about safety concerns.

“If we introduced the digital pound, we’d ensure it was protected to the very highest standards from things like cyber attacks or power cuts,” it said. “Fraud is also a risk people face today when making payments. The authorities and firms providing digital pound services would have a responsibility to ensure the digital pound helps prevent fraud, just like with banknotes. Consumers would enjoy the same protections that they have today.”

A CBDC in the UK has been in the works for a number of years now. The BofE and the Treasury carried out an initial consultation on the topic in 2020, but say the earliest the digital pound is likely to be usable would be towards the end of the 2020s. 

CBDCs are being considered by several jurisdictions, with more than 20 countries currently involved in pilot schemes. The European Central Bank is due to be trialling a central cryptocurrency this year, too. 

In general, most banks are cautious about investing in unregulated cryptocurrencies due to their volatility. However, many feel a centralised digital currency would allow people to reap the benefits of this type of technology, without the associated risks. HSBC chief executive Noel Quinn has previously expressed his support for CBDCs: “CBDCs can facilitate international transactions in e-wallets more simply, they take out friction costs and they are likely to operate in a transparent manner and have strong attributes of stored value,” he said. 

The Bank of England consultation closes on 7th June 2023. 

More from RiskBusiness on CBDCs: 

Central Bank Digital Currencies (CBDCs) explained.