UK authorities are to launch a consultation on a potential central bank digital currency (CBDC) next year.
HM Treasury (HMT) and the Bank of England (BoE) announced the next steps of their exploration of a potential digital pound in a joint-statement that describes a UK CBDC – should it get the go-ahead – as constituting a ‘major national infrastructure project’.
The consultation would set out the authorities’ assessment of the case for digital pound, including the merits of further endeavours to develop an operational and technology model for a UK CBDC, according to the statement.
The consultation will ‘evaluate the main issues, consider the high-level design features, possible benefits and implications for users and businesses, and considerations for further work’, the authorities state, adding that it ‘will form part of a “research and exploration” phase and help to inform policy development over the next few years’.
The consultation would inform a decision on whether to move into a development phase that would run for ‘several’ years, according to the statement. A technical specification would follow the consultation explaining any CBDC’s proposed conceptual architecture. This could involve in-depth testing of the optimal design for, and feasibility of, a digital pound.
If the results of the development phase conclude that the case for CBDC is made, ‘and that it is operationally and technologically robust’, the earliest launch date would be in the ‘second half of the decade’ – so, after 2025.
‘Aligning with government’s wider agenda’
In a written ministerial statement on 9 November, economic secretary to the Treasury John Glen described exploring the opportunities that a CBDC could offer as ‘aligning with the government’s wider agenda to remain at the forefront of innovation and technology in financial services’.
Details of the planned consultation are the latest signal that UK authorities are intensifying their work on a digital pound – dubbed ‘Britcoin’ in a tweet by UK chancellor Rishi Sunak in April.
HMT and the BoE announced the line-ups for two discussion groups – the ‘CBDC Engagement Forum’ and ‘CBDC Technology Forum’ – to inform their explorations of a CBDC in September. The former comprises 32 people focused on policy considerations and functional requirements. The latter, which comprises 26 members, is considering 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.
In June the BoE set out five ‘core principles’ that will form the backbone of its explorations into a potential digital pound.
The plan to establish the two discussion groups was announced in April, alongside the creation of a BoE-HMT CBDC taskforce. This taskforce is being co-chaired by the BoE’s deputy governor for financial stability, Sir Jon Cunliffe, and HMT’s second permanent secretary, Charles Roxburgh.
The BoE also has its own CBDC unit, overseen by Cunliffe, to lead both the central bank’s internal CBDC work and also its external engagement, including with other UK and international authorities.
‘Clearer idea’ of case for CBDC required
The BoE’s head of future technology, Will Lovell, spoke at an online event organised by the Digital Pound Foundation – an ‘independent forum to support the implementation of a well-designed digital pound and digital money ecosystem’ that launched last month – on 10 November.
The foundation’s chairman, Jeremy Wilson, opened the webinar, which was entitled ‘The Future of Money: Does the UK Need a Digital Pound?’ and saw about ten foundation members each outlining their particular interest.
“Before [UK CBDC] testing can happen, we’re going to have to have a clearer idea of what the case is, so we know what we’re trying to test,” Lovell, who is a member of the CBDC Technology Forum, said in his introductory remarks. “I don’t think we’re so interested in publicity-seeking proofs-of-concept – when we get to testing, it will be much more of real products with a view to pilot and a view to implementation.”
Susan Friedman, head of policy at US-headquartered enterprise software company Ripple, listed benefits of publicly issued digital currencies as including the enablement of micropayments and supporting government aims such as delivering targeted financial stimuli to individuals and businesses.
Vincent Mele, tech innovation strategy senior manager (focusing on digital assets, custody and CBDC) at Accenture, meanwhile highlighted “offshore circulation” of CBDC as being “where we [Accenture] see a tremendous amount of innovation could happen”.
Global momentum building
Globally an increasing number of central banks worldwide have started actually experimenting with retail CBDCs (also known as ‘general purpose’ CBDCs – CBDCs that would be available to the general population) – albeit most of those doing so have yet to commit to actually launching a CBDC.
Among major nations China is at an advanced stage of developing its CBDC, known as the e-CNY or digital yuan, while the Frankfurt-headquartered European Central Bank (ECB) recently revealed the 30 private-sector representatives who would form its ‘Market Advisory Group’ (MAG) to advise on the ‘design and distribution’ of a potential digital euro.
The Monetary Authority of Singapore (MAS) last week announced that it proceeding with building the infrastructure and ‘technical competencies’ for a CBDC despite its managing director telling the audience at the Singapore FinTech Festival that there was ‘no strong case’ for the imminent launch of a digital Singapore dollar.
The Bahamas became the first country to launch a fully deployed a digital version of a fiat currency – the ‘Sand Dollar’ – in October last year.
*** The Digital Pound Foundation has also released a paper entitled ‘The Retail versus Wholesale Debate: Should retail and wholesale clearing and settlement of CBDC payments be separated?’ authored by foundation members Jim Ford and Phil Kenworthy.
WATCH NOW (1hr32min15 total)
Will Lovell’s opening remarks run from about 09min20sec to 23min03sec while he also features prominently in the closing section from about 1hr15min30: the latter section looks at areas including interoperability and the environmental aspect of CBDCs
Source: You Tube / Digital Pound Foundation
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