The Bank of England (BOE) and HM Treasury have published their response to last February’s consultation paper on a central bank digital currency (CBDC) called the “digital pound.” Both concluded that it is too early to make a final decision on whether a digital pound is necessary while confirming their commitment to continued research and design of both a retail and wholesale CBDC.
“The Bank and HM Treasury judge that further preparatory work is justified to enable us to respond to developments in the payments landscape and to reduce materially the lead time if there is a future decision to introduce a digital pound,” the consultation response read.
The BOE and Treasury added that this response was just the start of the design phase of the project and that respondents’ feedback would help inform the continued work on a digital pound in both technology and policy terms.
They stated that the potential launch of a digital pound would occur no earlier than 2025 and that if the decision was eventually taken to go forward with a CBDC, “a digital pound would only be introduced once both Houses of Parliament had passed the relevant legislation.”
The BOE and Treasury received over 50,000 responses to the February 2023 consultation paper titled “The Digital Pound: A new form of money for households and businesses” from a combination of individuals, private firms, industry representative organizations, civil society groups, and academics.
Some of the specific concerns raised by these respondents were also addressed in Thursday’s response publications, notably those related to the future of cash, privacy, and users’ rights.
“To address these concerns, the publication confirmed that primary legislation would be introduced before the launch of any digital pound,” said the BoE and Treasury, adding that “trust is a prerequisite for a digital pound.”
This sentiment was echoed by the U.K. Deputy Governor for Financial Stability, Sarah Breeden, who said on January 25: “Trust in all forms of money is an absolute necessity. We know the decision on whether or not to introduce a digital pound in the UK will be a major one for the future of money. It is essential that we build that trust and have the support of the public and businesses who would be using it if introduced.”
To maintain this trust and public support, the BOE and Treasury confirmed that any proposals for a digital pound would include primary legislation to guarantee users’ privacy and control; neither the Bank nor the government would have access to users’ personal data; and authorities were committed to maintaining access to cash for those who prefer it.
Regarding the latter point, the BOE and Treasury stated that “banknotes and coins are important for many people so we will continue to provide them for those who want to use them. You would simply have even more choice when you make payments.”
Despite stating that a final decision was yet to be made and acknowledging respondents’ concerns, the messaging from the BOE and Treasury suggested the idea of a U.K. CBDC is still very much in favor.
“A digital pound would help to ensure that central bank money remains available and useful in an ever more digital economy, continuing to support UK monetary and financial stability,” said the consultation response. “It would also provide a public platform for private-sector innovation, promoting further competition, efficiency and choice in payments.”
U.K. Economic Secretary to the Treasury, Bim Afolami, commenting on the consultation response, was also keen to emphasize the importance of keeping pace with innovation.
“We are at an exciting time of innovation in money and payments, and we want to ensure the UK is ready should a decision to build a digital pound be taken in the future,” said Afolami. “This is the latest stage in our national conversation on the future of our money – and it is far from the last.”
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.
Watch: Blockchain provides perfect foundation for CBDC
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