The UK arrives fashionably late to the CBDC conversation
The Bank of England (BoE) has set up its own central bank digital currency (CBDC) taskforce in a bid to bolster the UK’s finance sector following Brexit.
Per an announcement on Monday, the UK’s central bank aims to ensure a “strategic approach” to exploring the practicalities of introducing a CBDC in the UK.
BoE stated its future CBDC would be a new form of digital money usable by both individuals and businesses. “It would exist alongside cash and bank deposits, rather than replacing them.”
UK Chancellor Rishi Sunak says he wants the City — UK’s equivalent of Wall Street — to stay a global financial center after Britain’s departure from the EU, which has been marked by job losses and business relocations.
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“The steps I’ve outlined today, to boost growing fintechs, push the boundaries of digital finance and make our financial markets more efficient, will propel us forward,” Sunak told Fintech Week UK attendees earlier this week, according to a recent UK government release.
“And if we can capture the extraordinary potential of technology, we’ll cement the UK’s position as the world’s pre-eminent financial centre,” he added.
BoE said it’s creating two forums for the taskforce. One will gather strategic input from senior stakeholders on non-technical angles while the other explores the concept with the nation’s tech sector.
UK plays CBDC catch-up
The UK taking steps towards issuing CBDCs — no matter how early and novel — is very on trend albeit late.
A recent report from Big Four accounting giant PwC (via Bloomberg) found around 60 central banks were exploring the technology, but most are still in test phases.
- CBDC proponents say they could reduce friction (and costs) in the financial system.
- They could also make it more efficient with round-the-clock central bank settlement.
- CBDCs can be coded to be interest-bearing, turning a store-of-value (fiat) into an investment instrument.
While China’s digital yuan gets loads of press, PwC reportedly found the Bahamas and Cambodia were ahead because their CBDCs are actually live. China is still running trials.
“Only 23% of retail projects have reached their implementation stages, while nearly 70% of wholesale projects are running pilot programs,” said PwC. Thailand and Hong Kong lead the pack for interbank CBDC projects.
CBDC critics often suggest governments find the technology interesting because it offers a level of economic surveillance unattainable with regular digital money.