Bank of England Announces CBDC Experiments

The Bank of England (BoE) is conducting a new series of experiments with central bank digital currencies (CBDCs) for retail use.

Citing growing innovations and risks in the payments industry, BoE said in a Tuesday (July 30) discussion paper that “central banks must be quick to engage with them and prepare for their implications” in a

Besides CBDCs, the central bank plans to use distributed ledger technology (DLT) in its experiments.

The advent of cryptocurrencies and the DLT that they operate on has driven central banks worldwide to see how they can incorporate the innovations into their operations.

“Our programme of experiments would be grounded in a set of policy outcomes which we seek from innovations in wholesale central bank money,” the bank said in the paper. “The programme would cover both wCBDC (wholesale CBDC) and synchronisation, as well as the relative merits of these two approaches.”

Synchronization would allow two separate ledgers to communicate, sending messages to earmark funds and settle payments, the paper noted.

Wholesale CBDCs, or digital tokens issued by central banks that are used only by institutions, could help interactions with programmable platforms, the paper further said.

The bank said it will work with the Treasury, Payments Systems Regulator and the Financial Conduct Authority in its experiments to ensure that all forms of currency, digital or otherwise, are interchangeable with each other.

The BoE has been exploring the feasibility of a CBDC since at least February.

As PYMNTS reported at the time, a formal consultation was started on Feb. 7 to develop guardrails around introducing a CBDC for the U.K., dubbed “Britcoin,” digital sterling or digital pound.

“The potential digital Britcoin would not be built until at least 2025, pending the path charted forward by the consultation, which indicated a hypothetical launch of the next generation currency by the end of the decade,” PYMNTS said in the report.

In April, BoE added 30 people to its team to oversee its central bank digital currency (CBDC) project, according to a separate PYMNTS report, citing a report by The Times.

“A team of 30 seems like quite a significant resource to focus on the digital pound,” Ian Taylor, an adviser to the trade association CryptoUK, told the Times. “It shows the impact it would have, and that the bank are serious about it.”