Bank of England and HM Treasury consult on plans for a digital pound
The consultation is part of the UK’s research into a potential central bank digital currency
The Bank of England and HM Treasury published a public consultation, ‘The digital pound: a new form of money for households and businesses?’ on 7 February, which sets out the case for a retail central bank digital currency (CBDC), or digital pound, in the UK. The consultation paper sets out the work necessary to enable a firm decision to be taken on whether to implement a digital pound in the UK and details the proposed model for a digital pound.
The consultation states that a digital pound will likely be needed in the future, based on research already carried out by the CBDC Taskforce. The joint HM Treasury and Bank of England CBDC Taskforce was launched in April 2021 to explore the potential of a CBDC in the UK. However, the CBDC Taskforce is not yet in a position to make a decision on whether or not to implement a digital pound in the UK.
The consultation’s stated purposed is to provide further research on a potential UK CBDC to ensure that the public have access to safe money that is convenient in the digital age, whilst supporting private sector innovation. Stakeholder feedback is being sought on a series of questions set out in the consultation paper, which is separated into four parts: (A) Our proposal for the digital pound, (B) The likely need for a digital pound, (C) Monetary and financial stability, and (D) Our model for the digital pound.
The Bank of England is also seeking feedback on a Technology Working Paper, accompanying the consultation, which provides details on the technical requirements and design considerations for a UK CBDC. The working paper provides further insight into the Bank of England’s thinking surrounding CBDC technology and outlines a series of design principles that would be applicable to the digital pound relating to privacy, performance, security, resilience, extensibility, and energy usage.
Deputy Governor of the Bank of England, Sir Jon Cunliffe, who co-chairs the CBDC Taskforce, delivered a speech on the newly launched consultation to UK Finance in which he stated, “In this next stage of detailed policy and technical work, including the development of a technical blueprint for the chosen model of the digital pound, we will work closely with private sector partners on proofs of concept, experimentation as well as on the development of the blueprint itself. We expect that this research and development work will have important benefits for both the Bank and the fintech industry even if the eventual decision is not to introduce a digital pound.”
The consultation closes on 7 June 2023. The Bank of England will then publish a response to the consultation and consider whether changes to the proposed model for a digital pound are necessary.