The Bank of England (BoE) and Treasury laid out the next stages of their plans to investigate a potential Central Bank Digital Currency (CBDC) for the UK on Tuesday, opening the floor to discuss entering what they called the "development" phase of planning.
If the results of this "development" phase conclude that the case for CBDC is made, and that it is operationally and technologically robust, then the earliest date for launch of a UK CBDC would be in the second half of the decade, the Bank said.
A potential digital pound, dubbed 'Britcoin' by the press, has been in the offing since April this year. In September, the bank brought in representatives from ASOS (ASC.L), Spotify (SPOT) and PayPal (PYPL), among other companies, to consult on its CBDC Engagement and Technology forums.
In a statement on Tuesday, the Bank said that in 2022, the Treasury and the Bank will launch a consultation which will set out their assessment of the case for a UK CBDC, including the merits of further work to develop an operational and technology model.
Watch: What is bitcoin?
It will evaluate the main issues at hand, consider the high level design features, possible benefits and implications for users and businesses, and considerations for further work.
No decision has been made on whether to introduce a CBDC in the UK, which would be a major national infrastructure project.
The 2022 consultation will inform a decision on whether the authorities are content to move into a ‘development’ phase which will span several years. A technical specification would follow the consultation explaining the proposed conceptual architecture for any CBDC. This could involve in-depth testing of the optimal design for, and feasibility of, a UK CBDC.
"This consultation will begin an open discussion on the role a UK central bank digital currency might play in the UK," said economic secretary to the Treasury, John Glen.
"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.”
The Bank has said that if put into practice, a CBDC would be a new form of digital money issued by the Bank of England and for use by households and businesses for their everyday payments needs. It would exist alongside cash and bank deposits, rather than replacing them.
“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," said deputy governor for financial stability at BoE, Jon Cunliffe.
"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.”
The consultation will form part of a ‘research and exploration’ phase and helps to inform policy development over the next few years.
Watch: What are the risks of investing in cryptocurrency?