Home Digital Currencies UK authorities tap into academia for central bank digital currency advice

UK authorities tap into academia for central bank digital currency advice

Bank of England: alongside HM Treasury it wants to ‘encourage diverse ideas, open debate and perspectives that challenge prevailing wisdom in relation to the digital pound’ | Credit: Ian Hall

The two authorities leading on the exploration into a potential central bank digital currency (CBDC) for the UK have announced the make-up of a newly formed advisory group of academics.

The Bank of England (BoE) and HM Treasury (HMT) describe their ‘CBDC Academic Advisory Group’ as being created to ‘bring together a diverse, multi-disciplinary group of experts to encourage academic research, debate and promote discussion on a range of topics, to support the Bank and HM Treasury’s work during the design phase of a digital pound’. It includes representatives from academic institutions located outside the UK, including Bocconi University (Milan, Italy), Trinity College Dublin (Ireland) and Massachusetts Institute of Technology (MIT – USA).

Announcement of the group, which will run alongside a pre-existing ‘CBDC Engagement Forum’ and ‘CBDC Technology Forum’, comes almost one year after the authorities jointly published a long-awaited consultation paper setting out an assessment of the motivations and design choices for a potential digital pound. While no commitment to issuance of a UK CBDC has been made, the consultation signalled that the digital pound was likely to be needed, so work would move into a ‘design phase’.

The 19 academics (listed by Global Government Fintech at the end of this article) are expected to provide a ‘wide-ranging and nuanced view on the key questions’ related to retail CBDC (also known as ‘general purpose’ CBDC, meaning a CBDC for everyday consumer or business use). The authorities want to ‘encourage diverse ideas, open debate and perspectives that challenge prevailing wisdom in relation to the digital pound’.

Just a handful of nations – including the BahamasJamaica and Nigeria – have to date formally issued a CBDC. But China’s authorities continue to progress the rollout of a digital yuanIndia is moving towards issuance of a digital rupee and the European Central Bank has entered a ‘preparation phase’ for a potential digital euro. Canada is among the nations that are significantly more cautious.  

RELATED ARTICLE Digital pound ‘likely to be needed in future’: UK CBDC consultation launches – our news story (7 February 2023) on the release of a ‘The digital pound: a new form of money for households and businesses?’ paper (and technology working paper)

Participation after open call for interest

The Academic Advisory Group (AAG) will be co-chaired by Neeraj Patel, a deputy director in HMT’s Financial Services Group, and Nick McLaren, who is the BoE’s Future of Money Division head – taking the total group-size to 21 people.

Participation in the group was based on the authorities’ assessment of applications after an open call for interest that closed in mid-September 2023. The authorities had originally anticipated that the group would be about 10 to 15-strong.

The BoE and HMT, which will jointly provide the secretariat, will not be under any obligation to formally consult the AAG on proposals in relation to the digital pound, nor to act upon the AAG’s advice, according to the Academic Advisory Group’s terms of reference.

Meetings are expected to be quarterly and held in-person at the BoE premises. Members will be able to request or suggest specific topics to be discussed. A summary of the minutes of each discussion will be published on the BoE’s website.

The authorities announced the line-ups for the ‘Engagement’ and ‘Technology’ Forums in September 2021. The former comprises 32 people focused on policy considerations and functional requirements while the latter, which comprises 26 members, has been considering issues including ledger design and data security. A few academics are also involved in those groups.

The authorities state that the ‘issues raised by the Academic Advisory Group may inform the topics considered by other engagement groups (for example, the CBDC Engagement Forum or the Technology Forum) and vice versa’.

RELATED ARTICLE Central bank digital currencies: checking out conditions for take-off – write-up of a breakout session on CBDCs at the Global Government Fintech Lab 2023 (18 May) that featured Katie Fortune, senior manager in the BoE’s CBDC unit, among the panel

Decision ‘around middle of the decade’

When issuing the consultation paper in February 2023, the authorities emphasised that no decision had yet been made to proceed with what has been described as a ‘major national infrastructure project’.

The 116-page ‘The digital pound: a new form of money for households and businesses?’ paper analysed the public policy case for a CBDC, set out elements of the authorities’ proposed design and revealed that the design phase would run until 2025.

A decision about whether to implement a digital pound is likely to be taken ‘around the middle of the decade’ and will ‘largely be based on future developments in money and payments’. A ‘build phase’ – including live pilot tests – would begin in 2025 at the earliest. The earliest launch timing, should the lights turn from amber to green, is likely be the latter half of the 2025-2029 period.

As well as consulting experts, the BoE has also engaged various external partners on CBDC assignments – see boxout.

Bank of England CBDC external contracts
(Global Government Fintech lists the contracts by value)
*Kin + Carta: £186,504 
(‘CBDC sample wallet proof-of-concept and research’; Feb-July 2023)
*Consult Hyperion: £121,825 (point-of-sale proof-of-concept prototype; ran to March 2023)
*Consult Hyperion: £113,650 
(e-commerce/CNP transactions feasibility study; ran to March 2023)
*Thales UK: £100,620 (‘CBDC proof-of-concept and research of offline payments; Jan-May 2023)
*Frontier Economics Ltd: £100,000 (‘targeted analysis of the microeconomics of a CBDC’; Jan-Mar 2023)
*MIT Media Lab DCI (USA): £75,000 (research; ran to 31 Jan 2023)
*Consult Hyperion: £48,900 
(feasibility study; Feb 2022-Apr 2022)
*Oliver Wyman: £32,000 (research; ran to 1 July 2023)
TOTAL: £778,499
Source: Global Government Fintech research using UK government Contracts Finder website (this boxout was first published by Global Government Fintech on 2 June 2023; an earlier version was also published on 10 January 2023 )

The objective of the ongoing CBDC design phase includes developing a ‘comprehensive and conceptual’ architecture and undertaking further experimentation and proofs-of-concept in collaboration with the private sector.

‘An effective design phase will ensure that the development of a digital pound can be accelerated if a decision is taken to build it’, the authorities state.

CBDC ACADEMIC ADVISORY GROUP

  • Alex Voorhoeve, Professor of Philosophy, London School of Economics (LSE)
  • Alistair Milne, Professor of Financial Economics, Loughborough University
  • Andrew Levin, Professor of Economics, Dartmouth College
  • Anna Omarini, Tenured Researcher and Adjunct Professor in Financial Markets and Institutions, Bocconi University (Milan, Italy)
  • Bill Buchanan, Professor of Computing, Edinburgh Napier University
  • Burcu Yüksel Ripley, Senior Lecturer of Law, University of Aberdeen
  • Danaë Stanton Fraser, Professor in Human Computer Interaction, CREATE Lab, University of Bath
  • Darren Duxbury, Professor of Finance, Newcastle University
  • David Skeie, Professor of Finance, University of Warwick
  • Davide Romelli, Associate Professor in Economics, Trinity College Dublin
  • Dirk Niepelt, Professor of Macroeconomics, University of Bern & CEPR
  • Doh-Shin Jeon, Professor of Economics, Toulouse School of Economics
  • Gbenga Ibikunle, Professor and Chair of Finance, University of Edinburgh
  • Iwa Salami, Reader (Associate Professor) in Law & Director, Centre of Fintech, University of East London
  • Jonathan Michie, Pro-Vice-Chancellor and Professor of Innovation & Knowledge Exchange, Kellogg College, University of Oxford
  • Marta F. Arroyabe, Reader & Deputy Head of Group, University of Essex
  • Michael Cusumano, Deputy Dean and Professor of Management, Sloan School of Management, MIT (Massachusetts, USA)
  • Pinar Ozcan, Professor of Entrepreneurship and Innovation, Said Business School, University of Oxford
  • Sheri Markose, Professor of Economics, University of Essex