The Bank of England plans to launch a sandbox to test a potential central bank digital currency or government-issued digital pound.
On Jan. 14, the BoE published a progress report outlining possible use cases for a CBDC, business models, and a test phase roadmap focused on blockchain-powered payment systems. Dubbed the “Digital Pound Labs,” the initiative is set to debut this year, aiming to foster partnerships between government authorities and private financial industry players.
The BoE stressed the importance of engaging both local and international participants to identify problems in existing payment ecosystems that a digital pound or CBDC could help address.
To achieve this, the BoE announced the closure of its Technology Forum, which previously served as a feedback channel for public and institutional input. Instead, the Digital Pound Lab will take a more “hands-on” approach, working alongside the Academic Advisory Group and the Engagement Forum as part of the bank’s consultation structure.
No decision on UK CBDC yet
Authorities have not concluded on advancing a CBDC program despite formally opening the Digital Pound Lab, per the BoE’s paper. According to the report, the bank and HM Treasury first plan to “develop a more detailed policy and technology framework” based on the consultation achieved during the design phase. The BoE expects this could take years.
Also, a digital pound would require the U.K. Parliament’s stamp of approval, followed by more public consultation before the introduction of primary legislation. Lawmakers previously urged caution regarding CBDCs in June 2023 after the central bank teased a sovereign digital currency in February.
No decision has been made on whether to proceed with a digital pound. After completing the design phase over the next couple of years, including taking account of developments in the wider payments landscape, the Bank and Government will assess the policy case for a digital pound and determine whether or not to proceed.
BoE progress report
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