UK Explores Potential for a "Digital Pound"

January 15, 2025 — The Bank of England and HM Treasury are exploring the possibility of introducing a digital pound, a digital form of currency designed to complement physical banknotes, the Bank of England website states.

A progress update from the Bank states that this move comes as the UK seeks to keep pace with the increasingly digital nature of the economy.

A digital pound, if implemented, would be issued by the Bank of England and would be fully exchangeable with cash and traditional bank deposits.

This would ensure a seamless transition and maintain a trusted, uniform, and accessible payment system.

The initiative aims to create a public platform that fosters innovation within the private sector, allowing businesses to develop new and user-friendly payment services.

However, no final decision has been made. The Bank and the Government are currently in a design phase, expected to last a couple of years.

During this period, they will thoroughly assess the policy implications and consider developments in the broader payments landscape, including the recently announced National Payments Vision.

Any decision to proceed with a digital pound would require parliamentary approval through primary legislation.

This legislation would prioritize user privacy, guaranteeing that neither the Bank of England nor the Government could access personal information or control how individuals and businesses use their digital currency.

Further public consultation will also take place before any legislation is introduced.

Over the past year, significant progress has been made in the design phase, the progress update stated.

The focus has been on gathering evidence to support a comprehensive cost-benefit analysis and inform future steps. Work has advanced on key components, including the vision and product roadmap, the scheme and technology framework, and the operational approach. Experiments have been conducted to address specific technical questions and understand how a digital pound could function within the existing payments ecosystem.

Engagement with external stakeholders has been a crucial part of the process, providing valuable feedback and shaping the project's direction.

The Bank and HM Treasury will continue to publish minutes of industry forums and share relevant research to keep stakeholders informed throughout the design phase.

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