HM Treasury and the Bank of England consider introducing a CBDC

The paper looks closely at the possibility of introducing a digital pound accessed through digital wallets and issued by the Bank of England. However, it’s worth noting that no decision has been made to introduce a central bank digital currency at the time of writing. Instead, the UK public is invited to share its opinion on the subject as part of a consultation.

The consultation paper reveals that the two entities consider it likely that the digital pound will be needed in the future. During the consultation, HM Treasury and the Bank of England agreed to engage extensively with stakeholders across the UK to seek views on the proposed model of the digital pound.

Responses to this consultation are invited from all interested members of the public, experts, and organisations. Respondents are invited to submit their replies until 7 June 2023. 

Representatives from the Bank of England and HM Treasury cited by altfi.com expressed that they want the UK public to have access to safe money that is convenient to use in the context of the increased digitalisation of everyday life. They also mentioned that a CDBC could support innovation in the private sector as well as offer choice and efficiency in digital payments. 

The officials also noted that a central bank digital currency would not replace cash but would work alongside traditional money by simply offering alternative means of payment. The Bank of England governor highlighted that a digital pound could provide a new way to pay, help businesses, maintain trust in money, and better protect financial stability.

What are the potential implications of a CDBC?

Representatives from the two entities also acknowledged that there are several implications that need to be considered before deciding whether to introduce a CDBC in the UK. The two most pressing matters concern privacy and security.  

As such, a CBDC would be subjected to rigorous standards of privacy and data protection. Moreover, neither the government nor the BoE would have access to personal data thus ensuring holders benefit from the same level of privacy that a bank account would provide. 

The UK is not the only country to explore the possibility of introducing a CBDC. In February 2023, a trio of Indian banks have begun testing in-store payments using the retail version of the digital rupee, while in January 2023, the Saudi Central Bank has revealed its plans to explore domestic wholesale CBDC use cases in partnership with local banks and fintechs.