LONDON, Nov. 9 (Reuters) – The Bank of England and the UK Department of Finance announced on Tuesday that they would hold a formal consultation next year on whether to move forward on a possible digital currency of central bank (CBDC) which would take years to introduce.
Central banks around the world are studying digital versions of their currencies to avoid leaving digital payments to the private sector, as the decline in liquidity has accelerated in some cases due to the COVID-19 pandemic.
“No decision has been taken on whether to introduce a CBDC in the UK, which would be a major national infrastructure project,” the BoE said in a statement.
“The earliest date for the launch of a British CBDC would be in the second half of the decade,” he added.
The consultation document will present a ministry and BoE assessment of a CBDC’s case before making a decision on whether to proceed.
“A technical specification would follow the consultation explaining the conceptual architecture proposed for any CBDC. This could involve extensive testing of the optimal design and feasibility of a UK CBDC,” the document said.
Financial Services Minister John Glen said a retail CBDC would be used by individuals and businesses for their day-to-day payment needs and help Britain stay at the forefront of innovation and technology in the financial sector.
In July, the European Central Bank took a first step towards launching a digital version of the euro, launching a 24-month investigation phase which will be followed by three years of implementation.
Work on a digital euro gained momentum after Facebook (FB.O) unveiled plans to create its own currency in 2019, a potential threat to central banks‘ core business.
While China has been at the forefront of CBDC moves, the US Federal Reserve has been more skeptical.
Some central banks have warned that widespread use of CBDCs could drain commercial banks, depriving them of a cheap and stable source of funding like retail deposits.
Reporting by David Milliken and Huw Jones, editing by Estelle Shirbon and Andrei Khalip
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