The Bank of England (BoE) and HM Treasury (HMT) are setting up a central bank digital currency (CBDC) taskforce to ‘co-ordinate the exploration’ of a potential digital pound.
The UK authorities’ move comes as international momentum builds towards the launch of CBDCs, with China in pole position among major nations with its progress towards the full rollout of a digital yuan.
The UK has, like most leading economies, yet to make a decision on whether to introduce a CBDC. But, in a flurry of co-ordinated CBDC-focused activity, the BoE also today (19 April) announced that it is to establish a CBDC unit, plus a ‘CBDC Engagement Forum’ and ‘CBDC Technology Forum’.
The chancellor, Rishi Sunak, announced the creation of the BoE-HMT taskforce in a speech to mark the start of ‘UK Fintech Week 2021’. He later tweeted ‘Britcoin?’ – a reference to popular cryptocurrency bitcoin – with a link to his speech.
Cunliffe and Braddick will co-chair
The BoE-HMT taskforce will be co-chaired by the central bank’s deputy governor for financial stability Sir Jon Cunliffe and HMT’s director general of financial services, Katharine Braddick. Membership will be limited to individuals from the BoE and HMT although other UK authorities will be involved in the taskforce’s work ‘as appropriate’.
The taskforce will, according to an announcement, co-ordinate exploration of the objectives, use cases, opportunities and risks of a potential CBDC; guide evaluation of the design features a CBDC must display to achieve the UK authorities’ goals; support a ‘rigorous, coherent and comprehensive’ assessment of the overall case for a digital pound; and monitor international CBDC developments ‘to ensure the UK remains at the forefront of global innovation’.
Cunliffe is chair of the Bank for International Settlements (BIS) Committee on Payments and Market Infrastructures and is the BoE’s established figurehead on the topic of CBDCs internationally.
Braddick, meanwhile, has been with the Treasury in 2014, joining from the Prudential Regulation Authority. She has previously worked at the Financial Conduct Authority (FCA) and Association of British Insurers.
Splitting out the tech
The BoE’s new CBDC unit, which is being overseen by Cunliffe, will be a dedicated division to lead both the central bank’s internal CBDC work and also its external engagement, including with other UK and international authorities.
The ‘CBDC Engagement Forum’, meanwhile, will see 20 to 30 members consider areas including the functional needs of CBDC users, the roles of public and private sectors in a CBDC system, financial and digital inclusion considerations, as well as data and privacy implications. Interested members have until 14 May to apply and will be drawn from financial institutions, civil society, merchants, business users and consumers.
The ‘CBDC Technology Forum’ will contain about 20 members from financial institutions, tech companies, fintech companies, infrastructure providers and academia.
This group will consider issues including ledger design, point-of-sale hardware choices, ‘the user journey’, data security, API (application programming interface) standards and the implementation of specific functionality such as offline payments. The same deadline applies for membership applicants.
The BoE has over the past year been sharing perspectives on CBDC matters with the Bank of Canada, Bank of Japan, Sveriges Riksbank (Sweden) and the Swiss National Bank, as well as the European Central Bank (ECB) and BIS. Cunliffe himself addressed last month’s BIS Innovation Summit on the topic of CBDCs, albeit focused on cross-border payments and wholesale CBDCs – a wholesale CBDC is for financial institutions, as opposed to public use.
During the opening session of the same conference, US Federal Reserve chairman Jerome Powell, Deutsche Bundesbank president Jens Weidmann and BIS’s own general manager, Agustín Carstens, all adopted a cautious tone on CBDCs, urging against rushing their rollout.
The Bahamas launched the first fully deployed digital version of a fiat currency last year and central banks collectively representing a fifth of the world’s population are likely to issue a general purpose CBDC in the next three years, according to BIS research published in January. But the same research said that most central banks were unlikely to issue CBDC in the foreseeable future.
The BoE issued a 57-page discussion paper, ‘Central Bank Digital Currency: Opportunities, Challenges and Design’, just over a year ago. It is expected to issue a response in due course.
*** Sunak also announced today that the FCA would be developing a ‘scale-box’ to provide regulatory assistance for firms that have moved beyond start-up status; and committed to work with regional and national fintech bodies to set up a private sector-led Centre for Finance, Innovation and Technology. Both initiatives were among the recommendations made in the recently published HMT-commissioned Fintech Strategic Review.
‘Digital euro tech investigations would take two years: ECB’s Panetta’ – Global Government Fintech’s news report on ECB digital euro taskforce chair Fabio Panetta’s appearance in front of the European Parliament’s economic and monetary affairs committee on 14 April at which he provided MEPs with an update on the prospect of a European CBDC
‘Public and private sectors must work together to improve cross-border payments: BoE’s Cunliffe’ – Global Government Fintech’s news report on a BIS Innovation Summit session last month featuring Sir Jon Cunliffe
‘Central banks pool brainpower on digital currencies’ – Global Government Fintech’s news story more than a year ago on a group of the world’s most influential central banks, including the BoE, teaming up to pool expertise on CBDCs
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‘Delivering Central Bank Digital Currencies (CBDCs): Exploring the Technology Challenge’ – a Global Government Fintech webinar, supported by our knowledge partner Amazon Web Services, on 22 April 2021