The Bank of England has announced its plans to explore possible use cases for a digital currency, in a move which could ultimately see a global central bank-backed stablecoin.
The U.K. central bank has teamed up with five other central banks, alongside the Bank for International Settlements, to research “CBDC use cases; economic, functional and technical design choices, including cross-border interoperability.”
The announcement sees the Bank of England join with other global central banks in exploring the impact central bank digital currencies could have on the wider financial system, with reserve banks in China, the U.S. and elsewhere already known to be actively exploring the technology.
Joining the Bank of England are the Bank of Canada, the Bank of Japan, the European Central Bank, the Sveriges Riksbank of Sweden and the Swiss National Bank. The project is to be led by the Bank of International Settlements, chaired by Bank of England Deputy Governor John Cunliffe and head of the BIS Innovation Hub Benoit Coeure.
The group is set to work alongside other agencies, including the Financial Stability Board (FSB) and the Committee on Payments and Market Infrastructures, towards developing its understanding of CBDCs.
Among the group, the European Central Bank and the Sveriges Riksbank are known to be working on the development of CBDCs, while the Bank of Canada and the Swiss National Bank have been actively researching the technology.
The latest development brings both the Bank of England and the Bank of Japan into the fold, following comments from Bank of England governor Mark Carney that a globally-backed CBDC could eventually replace the U.S. dollar as the currency of global reserve.
The People’s Bank of China (PBOC) is reported to be the global frontrunner in developing a bank-backed cryptocurrency, with the suggestion the bank has already completed the design phase of its version of the stablecoin.
In the works since 2014, the digital yuan would initially be distributed to commercial banks, before filtering down to individual businesses and users with digital wallets.
While the bank has denied the launch is imminent, its progress has revived calls in the U.S. to speed up the development of a dollar-based alternative.
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