The Bank of England (BoE) is advancing its research into the technical possibilities of a potential central bank digital currency (CBDC) by engaging a consultancy, Consult Hyperion, on a pair of assignments each carrying a value of more than £100,000 (about $122,000), Global Government Fintech can reveal.
A decision has yet to be made on whether to introduce a CBDC in the UK but the BoE, like many central banks worldwide, has a growing number of team members focused on exploring feasibility and operational considerations for what has been described as a ‘major national infrastructure project’. The BoE has also been turning to outside experts, with Consult Hyperion also used for a small CBDC project last year.
Contract award notices titled ‘Point-of-sale [PoS] proof-of-concept [PoC] consultancy services’ and ‘Feasibility study service on the e-commerce of CBDC’ have been published during the past week on the UK government’s ‘Contracts Finder’ service confirming Consult Hyperion’s new assignments.
The PoS PoC contract – fully described as the ‘provision of consultancy services to deliver a point-of-sale proof-of-concept prototype’ – is valued at £121,825 (about $149,000) and is running from 7 October 2022 to 6 March 2023 (the award notice was published on 5 January 2023).
The e-commerce contract – which is described as the ‘provision of consultancy service to deliver a feasibility study relating to the use of a retail CBDC as a method of payment for card-not-present (CNP) transactions, i.e. e-commerce, m-commerce [mobile commerce] and remote payments’ – is valued at £113,650 (about $139,000) and runs from 10 October 2022 to 9 March 2023 (the notice was published on 6 January 2023).
BoE’s CBDC assignments
Consult Hyperion’s head office is located in the Surrey town of Guildford, while its website also promotes a presence in New York City. The website shows about 30 team members and highlights expertise in three fields: ‘identity and rebuilding trust on the internet’, ‘payments for the 21st century’ and ‘smart ticketing to improve mobility’. Client testimonials are displayed from organisations including the Australian Payments Network, Digital ID & Authentication Council of Canada (DIACC) and UK body Transport for the North.
The company, which also works with other organisations on CBDC-related projects, worked for the BoE on CBDC early last year, providing ‘Feasibility study consultancy services’ (according to a notice posted on the Contracts Finder site on 9 November 2022). This contract was valued at £48,900 and ran from 7 February 2022 to 6 April 2022. All its BoE contracts are what are described as ‘call-off contracts’ under the Crown Commercial Service (CCS) ‘Payment Acceptance Framework’ (meaning they were awarded via a ‘mini-competition’ or direct purchase from the framework).
The Contracts Finder website also shows that the BoE is currently working with the management consultancy Oliver Wyman to provide ‘support on paper for research on digital currency’. The BoE awarded a contract worth £32,000 to Oliver Wyman on 2 July 2022 that will run until 1 July 2023. The firm’s specific brief is to ‘digest [a] 60-page CBDC working paper and understand evidence base used to build the report, understand key stakeholders’ approach across the Bank [of England] and collate global benchmarks from other central banks’.
The Contracts Finder website also shows that the BoE’s research project with the Massachusetts Institute of Technology (MIT) – a 12-month project that was announced last year and is contacted to end this month – has a value of £75,000.
In the final quarter of 2022 the BoE issued opportunities for a supplier to create a CBDC ‘sample wallet’ and also for a project exploring what was described as the ‘complicated’ possibilities and challenges of offline CBDC payments. These are separate assignments to those being reported on in this article.
CBDC consultation imminent
The BoE’s engagements of private-sector expertise on CBDC come as UK authorities prepare to issue a long-awaited consultation on a potential digital pound – dubbed ‘Britcoin’ in a tweet by then-chancellor (now prime minister) Rishi Sunak in April 2021.
UK chancellor Jeremy Hunt said one month ago that the authorities would be ‘bringing forward a consultation in the coming weeks to explore the case for a central bank digital currency – a sovereign digital pound – and consult on a potential design’. The consultation was promised more than 12 months previously.
The chancellor also said last month that the BoE will be releasing a technology working paper setting out ‘cutting-edge technology considerations informing the potential build of a digital pound’.
Consult Hyperion states in an article (published on its website) about the year ahead that ‘central banks will start making decisions on CBDC’. ‘Although CBDCs will need to work with the existing world – both physical and digital – they must also be able to support many future use cases including the metaverse, the micro-transactional world of IoT [Internet of Things] devices and the world of machine learning-driven payments,’ the article states. ‘We expect 2023 to be the year of change, as central banks start to decide exactly how they’re going to make this work. These decisions will have profound impacts on the geopolitical order, society and incumbent payment service providers.’
*** MIT Digital Currency Institute (DCI) has also been involved in CBDC research with the Federal Reserve Bank of Boston (US) and Bank of Canada. Boston Fed announced on 22 December 2022 that its work with MIT was ‘now complete’ and that ‘additional retrospectives’ on findings from what was known as ‘Project Hamilton’ would be released in the coming months.
Bank of England CBDC external contracts
*Consult Hyperion: £121,825 (point-of-sale proof-of-concept prototype; runs to 6 March 2023)
*Consult Hyperion: £113,650 (e-commerce/CNP transactions feasibility study; runs to 9 March 2023)
*MIT Media Lab DCI (USA): £75,000 (research; runs to 31 January 2023)
*Consult Hyperion: £48,900 (feasibility study; 7 February 2022-6 April 2022)
*Oliver Wyman: £32,000 (research; runs to 1 July 2023)
Source: Global Government Fintech research using UK government Contracts Finder website
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‘BoE wants digital wallet proof-of-concept to make CBDC “more tangible”’ – our news story (15 December 2022) on a ‘CBDC Sample Wallet Proof of Concept and Research’ opportunity being published on the UK government’s ‘Digital Marketplace’
‘Bank of England focuses on offline payments in CBDC proof-of-concept’ – our news story (21 October 2022) on the BoE looking to bring in external expertise for a project exploring what it described as the ‘complicated’ possibilities and challenges of offline CBDC payments
‘Digital pound’s potential benefits “overstated”, say UK Lords’ – our news story (24 January 2022) on ‘Central bank digital currencies: a solution in search of a problem?’, a report that concluded that there is ‘no convincing case’ for a digital pound
‘UK to consult on potential digital pound in 2022’ – our news story (15 Nov 2021) on UK authorities’ plans to launch a consultation during 2022 (it did not eventually launch in 2022 but is expected soon)
‘UK Treasury and Bank of England announce CBDC forum line-ups’ – our news story (30 Sept 2021) on the confirmation of line-ups for CBDC Engagement and Technology discussion groups (comprising 58 people in total)
‘Bank of England sets out five CBDC “core principles”’ – our news story (9 June 2021) on the BoE’s CBDC core principles
‘Prepare for ‘Britcoin’? Bank of England and HM Treasury launch CBDC taskforce’ – our news story (19 April 2021) on the BoE and HMT setting up a taskforce to co-ordinate their explorations (among other developments)