The Bank of England is setting up a task force focused on exploring the design and launch of a digital version of the pound. As reported by The Guardian, the Chancellor of the Exchequer Rishi Sunak announced the formation of a task force on Monday (April 19), comprised of the Bank of England and the UK Treasury, which would examine a national version of fiat done digitally to be issued by the central bank. Per Yahoo! Finance, the digital money could conceivably be used across a variety of retail and commercial transactions – but would operate alongside cash, not replace it.
The task force, according to comments on Monday, would focus on what is being termed a central bank digital currency (CBDC) with two forums in place – the engagement forum and the CBDC technology forum, bringing together stakeholders such as merchants, financial institutions (FIs) and consumers.
Per the Guardian report, Sunak has said that London should remain in the lead of developing a more advanced financial services sector. The task force would explore the opportunities and risks tied to a U.K. CBDC launch, and would evaluate design features.
The U.K. announcement comes against a backdrop where the Bank of International Settlements (BIS) has estimated that 86 percent of the 65 banks polled said they were at least in the opening stages of creating a digital currency, with 15 percent embarking on pilot programs. The Block notes that China, Russia and Japan are among the countries testing the digital currency waters.
“Our vision is for a more open, greener and more technologically advanced financial services sector,” Sunak said at a conference. “The U.K. is already known for being at the forefront of innovation, but we need to go further. The steps I’ve outlined today, to boost growing FinTechs, push the boundaries of digital finance and make our financial markets more efficient, [and] will propel us forward. And if we can capture the extraordinary potential of technology, we’ll cement the U.K.’s position as the world’s preeminent financial center.”
Staying Ahead of the Innovation Curve
In comments provided to PYMNTS on Monday (April 19), Dan Morgan, European policy lead at Plaid, said that “today’s announcements are a clear signal that the government sees both the potential of the FinTech sector as a growth engine for global Britain, and how central FinTechs are to the future of finance as consumer demand evolves.”
He added that “the steps set out by the chancellor are a starting point. By no means do they represent the adoption of the full range of recommendations within the Kalifa review, but they do illustrate that a significant deal of support will be given to ensure that the U.K. stays ahead of the innovation curve.”
He added that “the exploration of a new central bank digital currency (CBDC) through a joint taskforce – something we’ve seen in Asia, and what many argue will be the future of fiat currencies across the world – shows how far the digitalization of financial services has come.”
As reported in this space last month, the “Kalifa Review of U.K. FinTech” — named after Ron Kalifa, formerly the CEO of Worldpay — said that the U.K. had been part of the accelerating digital transformation of banks, asset managers, insurers and other parts of the financial services ecosystem.
“FinTech is not a niche within financial services. Nor is it a sub-sector. It is a permanent, technological revolution that is changing the way we do finance,” Kalifa wrote in the report, noting that the U.K. has about 10 percent of the global market share in the sector. The report recommends a “scalebox” that would enhance the regulatory sandbox that is already in place in the U.K. Digital pilots would be made permanent, and partnerships between FinTechs and FIs would be encouraged.
In other CBDC-related news, as tracked by PYMNTS, the Jamaica Information Service reported late last week that the Minister of Finance and the Public Service, Dr. the Hon. Nigel. Clarke, said at a conference that businesses should prepare for the launch of a national digital currency next year by the Bank of Jamaica.
“I would charge you, as leaders of customer service in Jamaica, to make sure that your enterprises are among the first to be equipped with the ability to accept this new form of payment,” the minister said at a conference. “I encourage you to invest in the platforms that are necessary for this kind of innovation, so you can stay ahead of the curve and deliver that superior experience to your customer.” The pilot of that digital currency is slated to launch later this year.
Separately, the South China Morning Post reported that China has added a half-dozen more regions to the pilot program tied to its digital yuan (more formally known as the digital currency electronic payment). China has been widely acknowledged as being “ahead” in the race to issue a CBDC.