Bank of England outlines next steps towards a digital currency in 2022

By Aisling Finn on Friday 12 November 2021

Digital Banking

Currently, 90 countries around the world are in the stages of exploring, developing or launching their own CBDC.

Bank of England outlines next steps towards a digital currency in 2022
Image source: Robert Bye/Unsplash.

 

Several central banks around the world have already begun looking into launching their own Central Bank Digital Currency (CBDC) and the Bank of England is following suit.

A CBDC is a digital form of money that is issued by a central bank, in the UK’s case it’s the Bank of England, and has been something in the works in other countries for more than a decade—with 90 countries around the world at some stage of looking into, launching or developing their own digital currencies.

CBDCs do not replace cash and bank deposits, rather it will be used alongside the traditional forms of payment by households and businesses.

In 2022, the Bank of England said it will continue looking into the possibility of launching a digital currency, in partnership with the Treasury, and will look at what needs to be done to get the UK to a stage where it can launch its own digital currency.

“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,” deputy governor for financial stability, Jon Cunliffe, said.

“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.”

The 2022 consultation will inform a decision on whether or not the UK is ready to move into a ‘development’ stage, with the Bank of England stressing that the upcoming consultation is just part of a ‘research and exploration phase.

"This consultation will begin an open discussion on the role a UK central bank digital currency might play in the UK,” economic secretary to the Treasury, John Glen, added.

"I’d encourage everyone to contribute to the discussion so we can explore the opportunities this could bring, as well as understanding any risks it may pose.”

While the consultation is a step in the right direction, it’s no indicator of whether or not the Bank of England will pursue a digital currency.

In April 2021, the Bank of England and the Treasury took the first small steps to launching the consultation, putting together a joint task force to coordinate the exploration of a UK CBDC.

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