The Bank of England and the UK Treasury published their response to a consultation paper on the ‘digital pound’ in February.
In a response published on Thursday, the BoE and the UK Treasury decided that it was still too early to definitively decide whether a digital pound would be needed. However, it said it plans to continue its research and design efforts on central bank digital currency (CBDC).
“The Bank and the Treasury consider that additional preparatory work is warranted to respond to developments in the payments environment and to substantially reduce lead times if a decision is made to introduce a digital pound in the future,” it said in its consultation response.
The response from the Bank of England and the Treasury stated that the digital pound’s design phase will continue to explore the feasibility of the UK having both a retail and wholesale CBDC. It also stated that the potential launch of the digital pound would occur before 2025.
Two consultation respondents addressed privacy and trust issues related to the digital pound, saying these issues would be addressed through new legislation. The BoE and Treasury said they had “confirmed that framework legislation will be introduced prior to the launch of the digital pound to address these concerns”.
The response also confirmed that once the retail CBDC is launched, neither the BoE nor the UK Treasury will have access to users’ personal data.
“Trust in all forms of money is absolutely essential. We know that the decision on whether to introduce a digital pound to the UK will be a key decision for the future of money. We need to build that trust and help the UK Sarah Breeden, deputy governor for financial stability at the Bank of England, said: “I think there will be support from the public and businesses to use it if it is introduced.”
Most of the responses to the consultation mentioned the wider societal implications of introducing a retail CBDC, such as the future of cash and the privacy and rights of digital pound users.
A digital pound that cannot replace cash
According to the consultation response, a digital pound would help “ensure central bank funds remain available and useful in an increasingly digital economy, continuing to support the UK’s monetary and financial stability”. The BoE and Treasury added that the Digital Pound will provide a public platform for private sector innovation to further promote competition, efficiency and choice in payments.
However, the response to the consultation document emphasized that the digital pound would not replace cash. “Banknotes and coins are important to many people, so we will continue to offer them to those who want to use them. They will have even more choice when making payments,” the BoE and Treasury added.
The consultation report collected more than 50,000 responses over the past year, focusing on the potential for the UK to develop a central bank digital currency (CBDC) to be used for the everyday payment needs of households and businesses.
Thursday’s response outlined how the BoE and the U.K. Treasury plan to act on the findings of the original consultation paper, titled “Digital Pound: A New Form of Money for Households and Businesses” published in February 2023.
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