By Samuel Indyk
Investing.com – The Bank of England has provided an update on the exploration of a UK Central Bank Digital Currency (CBDC), saying that no decision has yet been made on whether to introduce a CBDC in the UK.
In a statement on its website, the central bank said that a CBDC would be a new form of digital money issued by the Bank of England and for use by households and businesses for their everyday payment needs.
Next steps
The Treasury and the Bank of England plan to launch a consultation next year which will set out the case for a CBDC, including the merits of further work to develop an operational and technology model for a CBDC.
The consultations will inform the decision on whether the authorities are content to move into a ‘development’ phase which is expected to take several years.
The central bank said that if the results of the ‘development' phase conclude that the case for CBDC is made, then the earliest date for a launch of a CBDC in the UK would be the second half of the decade.
“The plan to publish a consultation next year on CBDC is a crucial step in our policy development, especially as we further our thinking on the pressing issues at hand,” said Bank of England Deputy Governor for Financial Stability Jon Cunliffe.
“What it will do is provide a platform for interested parties and relevant groups to engage with the key questions on the merits of CBDC, and whether the public sector should advance to a development phase.”
Are the Bank of England behind the curve?
In Europe, Sweden is the country most advanced with its plans for a CBDC with its e-krona project. The Riksbank started analysing the need for an e-krona back in 2017 and is continuing to test the technology in Sweden.
Globally, China is the most advanced with a CBDC, having rolled out a pilot programme in late 2019.
Since then, digital yuan transactions have reached CNY 62 billion, or approximately $9.7 billion. Currently, around 1.6 million merchants accept China’s CBDC.
The digital yuan has been trialled in major cities but there is still no timetable for a full roll-out.
Speaking earlier today at a conference hosted by the Bank of Finland, People’s Bank of China Governor Yi Gang said the country plans to further “improve the e-CNY ecosystem”.
Some may argue that the Bank of England risks falling behind the curve, after stating that they don’t foresee a launch until the second half of the decade.
However, others may argue that it is prudent to wait, identify the pros and cons, and learn from those that have launched before you.