UK to Launch Exploratory Taskforce for CBDC

UK Chancellor of the Exchequer Rishi Sunak announced the launch of a new task force to explore the potential for a central bank digital currency (CBDC).

Sunak announced about the CBDC at the Innovate Finance Global Summit. He said:

“We’re launching a new task force between the Treasury and the Bank of England to coordinate exploratory work on a potential central bank digital currency.”

“Alongside this, we will set up a new financial market infrastructure ‘sandbox’ for firms innovating with technologies like distributed ledger technologies,” he also added.

In accordance with the announcement, the Bank of England (BoE) has established a dedicated CBDC unit. Deputy governor Jon Cunliff will oversee the unit. BoE will explore the creation of a digital pound by setting up two stakeholder forums on CBDC engagement and technology.

Sunak’s further remarks

Sunak also said the government would consider capital market reforms, such as easing regulation on share trading. Moreover, this would happen while ensuring “the highest possible regulatory standards,” he said.

The Chancellor also highlighted that the BoE had published a new account policy. Accordingly, this will allow new and innovative financial market infrastructure propositions. 

Under this new model, a payment system operator could hold funds in the omnibus account. This will enable them to fund their participants’ balances with central bank money.

Private-sector stablecoin initiative Fnality has announced its intention to apply for an omnibus account. John Whelan, Managing Director of Digital Assets & Innovation at Banco Santander:

“It is exciting to see this development from the Bank of England supporting the opportunity to use tokenized cash assets on next generation payment systems, enabling on-chain wholesale exchange of value.”

Japan’s CBDC developments

The UK is the latest developed country to announce its intentions to develop a CBDC project further. Earlier this month, the Bank of Japan (BOJ) initiated its experimentation with a CBDC. The BOJ also established a committee to oversee these developments.

The head of this committee, Kazushige Kamiyama, spoke last week about CBDCs. He said his country was cooperating with several other central banks to determine the best way to issue a CBDC.

He also highlighted his skepticism over China’s efforts in their digital yuan. Kamiyama said that their efforts, which began several years ago, maybe utilizing outdated technology. He also implied that it might not be safe, have a stable value, or move without restrictions, which he stated is necessary for a successful CBDC.

In light of these things, he said that the Biden administration need not fear the digital yuan. An earlier report stated the US was concerned it could overtake the dollar as the world’s reserve currency.