The UK Treasury and the Bank of England have assembled a taskforce to explore the technology of central bank digital currencies.
The British government and the Bank of England are putting plans in motion to examine a central bank digital currency.
The concept of a central bank digital currency (CBDC) has been bubbling around for years. It would involve a monetary authority issuing its own digital currency, much like bitcoin, but it would be pegged to the value of a fiat currency, in this case the British pound, and controlled by the central bank.
Proponents believe a CBDC would speed up transactions and address the dwindling prominence of cash while maintaining central bank oversight, something that can’t be said for notoriously volatile cryptocurrencies like bitcoin.
Amid the recent spike in bitcoin’s price and surging interest among Wall Street and institutional investors, CBDCs have garnered policymakers’ attention again.
The Bank of England and the Treasury have established a taskforce to probe the ins and outs of creating a CBDC in the UK. The taskforce will include two forums for discussing the technology that will underpin such a currency and what the effects on security and privacy may be.
The taskforce will be co-chaired by Jon Cunliffe, deputy governor for financial stability at the Bank of England, and Katharine Braddick, HM Treasury’s director general of financial services.
Speaking at a conference today (19 April), UK chancellor of the exchequer Rishi Sunak said the taskforce would “coordinate exploratory work on a potential central bank digital currency”.
“The government and the Bank of England have not yet made a decision on whether to introduce a CBDC in the UK, and will engage widely with stakeholders on the benefits, risks and practicalities of doing so,” the Bank of England said in a statement.
The UK is the latest country to at least put a CBDC under serious consideration. Sweden has run a number of trials with its ‘e-krona’, but China is by far the most advanced country with its digital yuan. It has run several trials with the digital currency with real businesses that could yet prove to be a framework for other countries to follow.