The Bank of England (BoE) has become the latest central bank to partner with the Massachusetts Institute of Technology (MIT) on a central bank digital currency (CBDC) research project.
The BoE announced the 12-month research partnership recently, revealing that it will specifically be working with MIT Media Lab’s Digital Currency Initiative (DCI) “to explore potential technical challenges, trade-offs, opportunities and risks involved in designing a CBDC system.”
It stated that this partnership will be part of the bank’s wider research and exploration of CBDCs. While it has continued to conduct research on the feasibility of a digital pound, the BoE hasn’t committed to developing one yet. Just as with many of its peers, including the U.S. Federal Reserve Bank and the Bank of Japan, the BoE has claimed it wants to be aptly prepared if it ever feels the need for a CBDC.
The bank stressed that it would not be developing a CBDC with the MIT team, stating “This work is focused on exploratory technology research and is not intended to develop an operational CBDC. No decision has been made on whether to introduce a CBDC in the UK, which would be a major national infrastructure project.”
BoE joins the U.S. Federal Reserve Bank of Boston and the Bank of Canada, both of whom have announced partnerships with the MIT DCI this year. The latter announced its partnership two weeks ago, claiming that it was just conducting research on different technical approaches and also stressing that it had not made any decision about issuing its own CBDC.
And while Canada continues to research its CBDC, the central bank has previously stated that the biggest possible trigger for it to move ahead with rolling out a CBDC would be if the U.S. Fed issued a digital dollar. This, it says, could possibly lead to more Canadians using U.S. currency at the expense of the local currency, which could have far-reaching effects on the economy.
For BoE, 2022 is the defining year, with a senior official revealing that the bank will decide on the digital pound, dubbed the “Britcoin,” this year. The official also revealed that the bank would relegate the development of a retail CBDC wallet to the private sector, unlike other countries like China which have developed the wallets at the state level.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
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