Bank of England begins new CBDC research phase

20 February, 2023Joshua Downes

Pounds stacked up

The Bank of England has announced that it is assessing the case for a retail central bank digital currency. But is the UK really ready for ‘Britcoin’ – and will the potential benefits outweigh the risks?

Why is the Bank of England considering a digital currency?

New forms of private digital money, such as stablecoins, are convenient and highly scalable. The Bank of England has suggested that if they are used for large volumes of retail transactions then they have the potential to fragment the existing payments system and lead to the disintermediation of banks, which are currently responsible for most of the money supply.

A UK CBDC is being investigated as a potential solution, allowing the Bank to retain monetary sovereignty while ensuring people have access to the latest online payment services.

When could we see a UK CBDC?

The Bank of England has finished the ‘research and exploration’ phase of a potential CBDC and has concluded that a “digital pound will likely be needed in the future.”

This next phase is expected to take around two to three years, after which the bank will decide whether or not to proceed to the next stage, which would involve building the infrastructure for a CBDC. The Bank has suggested that ‘Britcoin’ could feasibly be ready by 2030.

But there are risks involved.

The potential risks to the financial system

The Bank has acknowledged several risks associated with a potential UK digital currency – the most prominent ones being a digital pound’s potential impact on the equilibrium interest rate, as well as the risk of bank runs.

And then there’s the question of how consumers will react. Will they trust a digital currency?

We spoke to Garrett Cassidy, co-founder of fintech startup Trezeo, and former managing director of Circle in Europe, for his views on the likely future for a digital currency.

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