Tuesday 09 November 2021 6:20 pm | Updated: Tuesday 09 November 2021 6:21 pm

Bank of England to launch consultation on plans for a digital pound

John Cunliffe (pictured) said the Bank could not ignore the possibility that the use of cash would become increasingly irrelevant while “new forms of money” would become more and more prominent

State issued digital currency promises to be the next big financial experiment as the UK’s Central Bank prepares to launch a consultation on the electronic pound.

HM Treasury and The Bank of England have joined forces to explore issuing a digital currency backed by the UK’s central bank, known as a CBDC, and are planning to hold a consultation on taking the project forwards in 2022. The proposed deliberations will inform a decision on whether the authorities are content to move into a ‘development’ phase of the project which could take several years, a statement from the Bank of England confirmed.

Economic Secretary to the Treasury, John Glen, said: “This consultation will begin an open discussion on the role a UK central bank digital currency might play in the UK.

“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,” he added.

Deputy Governor for Financial Stability, Jon Cunliffe, also commented: “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. 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.”

Interest in central bank backed digital currencies has been growing worldwide with Nigeria recently becoming the latest country to take the plunge with the launch of the eNaira. CBDCs capitalise on the popularity of crypto currencies by providing users with an ultra fast, low-fee digital payment method.

China remains a frontrunner in the field and has launched a trial for an eYuan which has already attracted over 20m users. Meanwhile, the EU expects an electronic Euro to be operational by 2025.

In April 2021, the Bank and HMT initiated the joint CBDC Taskforce to coordinate the exploration of a potential UK CBDC. The Bank also set up the Engagement and Technology forums, where relevant stakeholders from industry, civil society and academia provide strategic and technical input to the work on CBDC.