In February 2023 the UK Government in conjunction with the Bank of England set out its public consultation on the potential case for a UK central bank digital currency, or CBDC, also known as a “digital pound”. The Government said the consultation would start “a national conversation about the future of our money” and is part of a broader agenda “to ensure the UK remains competitive and at the forefront of payments innovation”.
As part of its inquiry the All-Party Parliamentary (APPG) invited views on CBDCs particularly in relation to the potential use cases of any future UK CBDC as well as the opportunities and potential risks associated with a UK CBDC. The UK Government has said given the rapid pace of innovation we are seeing in digital currencies around the world that a digital pound is “likely to be needed in the future” and that Government is “convinced that further preparatory work is justified.”
The APPG heard that while it is right that the UK should actively explore the potential for a digital pound there remain questions about what any future digital pound might look like, as well as continued debate regarding the potential opportunities and potential risks which the UK overnment should consider moving forward, including challenges for financial stability, the protection of privacy and security risks.
Among its recommendations the APPG noted that: the introduction of any future digital pound should not stifle private sector innovation; the Bank of England should pilot, experiment and test any future digital pound with various design options, using different technologies; and the impact of other countries’ CBDCs in the UK strategy for exploring a future digital pound.