- Bank of England and HM Treasury will coordinate to explore a potential UK Central Bank Digital Currency (CBDC).
- The coordination will be led by a Taskforce consisting of specified individuals from the Bank of England and HM Treasury.
- Even if a CBDC is launched, it will not replace cash and bank deposits, rather exist alongside them.
The UK government has launched a Central Bank Digital Currency (CBDC) Taskforce to start exploring the potential of a state-backed digital currency.
As per the official data, the Taskforce will primarily only include relevant individuals from the Bank of England and HM Treasury. However, other UK authorities will be involved when “appropriate.” The Taskforce is co-chaired by the Deputy Governor of the Bank of England, Jon Cunliffe, and HM Treasury’s Director General of Financial Services, Katharine Braddick.
Britain is not yet sure whether to launch a CBDC or not. Hence, the primary objective of the Taskforce will be to explore the practicability, utility, and of course, possible risks involved with this act. According to a statement from the Bank of England:
The Government and the Bank of England have not yet made a decision on whether to introduce a CBDC in the UK, and will engage widely with stakeholders on the benefits, risks and practicalities of doing so.
If a CBDC is launched, it would act like a new form of money that would exist alongside cash and bank deposits, rather than replacing them. “The Government recognises that cash remains important to millions of people across the UK, and has committed to legislating to protect access to cash,” the statement mentioned.
At its core, the responsibilities of the CBDC Taskforce is divided into 4 parts:
- Exploration of the use cases, objectives, opportunities, and risks of a potential UK CBDC
- Guiding evaluation of the economic, designing features a CBDC must display
- Ensuring a rigorous, coherent, and comprehensive assessment of the overall case for a UK CBDC
- Monitoring international CBDC developments to ensure the UK remains at the forefront of global innovation
A CBDC can widen access to central bank funds, ease transferring money both domestically and internationally, and facilitate tracking transactions. However, there are big issues of safety and privacy with this innovation. That is why many central banks are considering CBDC with great precaution.
Among the first front-runners to create a CBDC stands China, which has been working on developing a national digital currency since 2014. China has already started real-world trials for its digital currency in several cities including Shenzhen, Chengdu, and Suzhou.