The UK Treasury and the Bank of England are launching a consultation in 2022 to assess the case for a Central Bank Digital Currency (CBDC).
CBDC would be a new form of digital money issued by the BoE and for use by households and businesses for payments. It would exist alongside cash and bank deposits, rather than replacing them, the Treasury and the BoE said in a statement.
The earliest date for launch of a UK CBDC would be in the second half of the decade, depending on the outcome of consultation, the statement said.
The consultation will evaluate design features as well as possible benefits and implications for users and businesses.
The BoE and the Treasury set up a taskforce last April to coordinate the exploration of a potential UK CBDC, but no decision has been made yet on whether to introduce a CBDC in the UK.
The 2022 consultation will be a “research and exploration” phase which will inform a decision on whether to move into a “development” phase. The process would take several years before at CBDC could potentially be launched in the second half of this decade.
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.”
Jon Cunliffe, Deputy Governor for Financial Stability at the BoE, added: “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.”
A number of central banks around the world are looking into developing digital currencies following the growing demand for crypto-currencies such as Bitcoin.
China is currently testing a digital yuan, eCNY, but has not set a timetable for its official rollout.
People’s Bank of China governor Yi Gang said China is working on improving eCNY’s privacy protection and anti-counterfeiting feature and increasing its interoperability with existing payments tools.