The Bank of England and HM Treasury have issued a joint consultation on a digital pound.
The consultation sets out analysis by HM Treasury and the Bank of England on the potential case for a UK central bank digital currency – a “digital pound”. It sets out, in some detail, the key features of a potential model.
A digital pound would be a new form of digital money for use by households and businesses for their everyday payment needs. As part of the wider landscape of money and payments it would sit alongside, not replace, cash. As such, it would be a digital counterpart to familiar, trusted banknotes and coins, and the government and the Bank of England say that it would be subject to rigorous standards of privacy and data protection. The government says that its ambition is that public trust in money remains high, and that modern forms of money and payments meet the evolving needs of individuals and businesses.
Unlike cryptoassets and stable coins, the digital pound would be a central bank digital currency or CBDC – sterling currency issued by the Bank of England and not by the private sector.
Although it is too early to commit to build the infrastructure for a digital pound, the Bank of England and the Government are convinced that further preparatory work is justified to appropriately respond to the emergence of new technologies, international developments and fresh opportunities.
The UK government says “this consultation is a vital step in positioning the UK to act decisively by introducing a digital pound, should we choose to do so.”
The Bank of England has also published a Technology Working Paper exploring the many technological challenges involved in a digital pound. It explores technology design considerations which help to form a basis for the Bank’s current thinking on the technology requirements of a UK CBDC, and which will likely have a significant impact on the design choices for CBDC. The paper also sets out an illustrative conceptual model, which is based on the platform model of CBDC. It outlines how different components of the conceptual model might operate and how ecosystem participants might interact with these components.
The consultation ends on 7 June 2023.
