The UK is exploring its next step in becoming a global hub for digital payment innovation with the official launch of a consultation into Central Bank Digital Currencies (CBDCS). 

The country’s CBDC, the digital pound, has been earmarked for several years and now the Bank of England (BOE), alongside HM Treasury, have released a consultation titled ‘The digital pound: a new form of money for households and businesses?’. 

The document explores the need for the digital pound in the future and confirms that the CBDC will be a retail one issued by the BOE to provide public access. The requirement of CBDCs is heightened due to the acceleration of digital payments rising by 58% and cash payments declining by 15% since 2012. 

Elements of the digital pound may include: 

  • Wallets dedicated to hold the digital pound 
  • Accessible to UK and non-UK residents 
  • No interest fees
  • Initial limited amounts per user
  • BOE and Government will not have access to personal data

“The way we use money in the United Kingdom is changing, bringing fresh opportunities and new considerations for public policy,” stated Chancellor Jeremy Hunt, and Governor of the BOE Andrew Bailey

“Ensuring that public trust in money remains high, and that our modern forms of money and payments meet the evolving needs of individuals and businesses, are fundamental responsibilities of the Government and the Bank of England.

“We are determined that the UK should remain at the forefront of innovation in money, payments and financial services.”

The BOE and the Treasury have asserted that cash will still be available for those without an online bank account. 

Nothing is imminet, though, as the consultation outlines that it could take several years before a UK CBDC may be launched as both the government and the BOE explore operational features and the technology needed to get the digital pound off the ground. 

The Telegraph recently reported that it may come as late as 2030 before UK citizens have the chance to interact with the digital pound. It is reported that the government is taking its time with the project, as a CBDC has the potential to change the payments landscape within the country for the foreseeable future.

Chris Ford, Head of Government Affairs EMEA at R3, believes a UK CBDC has the opportunity to “enhance efficiency across our financial market infrastructure”, and become a solution to many problems. 

He stated: “The Treasury’s plan to investigate the design of a digital pound is a significant moment for our cutting edge fintech sector and demonstrates the UK government’s serious intent about putting technology at the heart of our financial services industry. 

“Regulated CBDC, built on Distributed Ledger Technology (DLT), can enhance efficiency across our financial market infrastructure and solve real problems that have held us back for decades.

“Following last week’s proposals to regulate crypto assets, it is clear that the government sees DLT as a core pillar through which it can drive financial innovation. Amidst rising competition from Europe and elsewhere, the application of blockchain and related technologies will be key in ensuring the UK retains its status as a global hub for financial services.”

Whilst the UK bides its time on a digital pound, many other countries are looking into CBDC’s as the next step in payments’ evolution.

 More recently, India launched a pilot for its digital rupee and Japan is set to launch its pilot for a digital yen this upcoming spring. The acceleration of countries adopting an official digital currency is seemingly driving the next step in how people interact with their money.