Project 1: Project Digital Pound
The relevant UK authorities have indicated a potential requirement for a central bank digital currency termed the “digital pound,” which could take the form of either wholesale or retail versions. The Bank of England has released multiple policy papers concerning the central bank digital currency (CBDC) concept. These documents explore various aspects, such as the potential necessity for the digital pound, its design attributes, and its possible applications for both consumers and businesses. The discussion paper was published in March 2020 followed by the technology and the consultation papers in February 2023.
The driving factors behind the digital pound include establishing central bank money as a foundational element for instilling confidence and security in currency, as well as fostering advancements, options, and efficiency in payment methods. While using the digital pound to enhance international payments is an opportunity, accomplishing this goal would require time and collaboration on a global scale.
A consultation paper outlines an evaluation of the case for a retail central bank digital currency, referred to as the “digital pound.” This digital pound would be a novel manifestation of the British pound, resembling a digital version of a banknote, issued by the Bank of England. Its purpose would be to serve the everyday payment needs of households and businesses, enabling transactions both in physical stores and online, as well as facilitating peer-to-peer payments. In the event of its introduction, the digital pound would coexist alongside traditional cash and bank deposits, offering easy conversion between these forms.
The digital pound’s introduction would ensure continued public access to retail central bank money, and as society and the economy increasingly transition into digital realms, it would also stimulate innovation, choice, and efficiency within domestic transactions. The collaboration between HM Treasury and the Bank of England encompassed extensive engagement with stakeholders throughout the UK to gather insights into the proposed digital pound model. Individuals, experts, and organizations were all invited to contribute their perspectives in response to this consultation effort.
In the upcoming stages of central bank digital currency (CBDC) development, particularly within the design phase, the focus will be directed towards the technological considerations and the trade-offs associated with CBDC design. These aspects will be examined in light of their implications for our policy objectives, as outlined in the digital pound consultation paper. This evaluation will encompass the assessment of technical prerequisites and the identification of optimal solutions to address them.
Throughout the design phase, the Bank’s efforts will involve the creation of a comprehensive conceptual framework that can serve as a guiding plan for constructing a CBDC in the UK, should the decision to proceed to an implementation phase be made. Concurrently, the Bank will engage in collaborative endeavors with private sector innovators to undertake experimentation and proofs of concept. These initiatives aim to provide valuable insights that contribute to the refinement of the CBDC architecture and enhance the technological expertise related to digital currencies within the private sector.
Sources:
https://www.bankofengland.co.uk/paper/2023/the-digital-pound-consultation-paper
Project 2: Project Jasper Ubin — Cross border payments with wholesale CBDC
Focus Area:
Enabling Cross-Border High Value Transfer Using Distributed Ledger Technologies
Overview:
In collaboration with Payments Canada, the Bank of Canada joined forces with the Monetary Authority of Singapore and the Bank of England to develop a cross-border, cross-currency settlement system. This partnership merges the efforts of Project Jasper and Singapore’s Project Ubin, with the aim of utilizing distributed ledger technology (DLT) to enhance the speed and cost-effectiveness of cross-border payments.
The team successfully demonstrated a cross-border, cross-currency, cross platform atomic transaction without the need for a third party that is trusted by both jurisdictions.
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