Minutes
Item 1: Welcome
The Chair opened the meeting by welcoming Members and noting that this was the first meeting since the Innovation in Money and Payments Conference, at which many AAG members had participated. The Chair was very pleased with the quality of the event, which had facilitated engagement across academia, central banks and industry.
The Chair provided an overview of progress on the digital pound design phase. An October 2025 update and four design notes had been published since the previous meeting, covering Product Strategy, Interoperability, Alias Service and Offline Payments.
The Bank had also advanced experimentation through the Digital Pound Lab, with Phase 1 testing predefined use cases and Phase 2 now open to broader proposals.
The Chair explained that this was expected to be the final meeting of the Group in its current form, with the Bank planning to launch a Payments Academic Advisory Group to cover a broader range of issues across money and payments. Members of the existing CBDC AAG would be welcome to apply.
The Chair outlined the plan for the meeting, at which we would be discussing each sub-group’s topic of focus.
Item 2: Subgroup discussion – Security
Does the digital pound design meet best practice for a secure provision?
Members:
- Bill Buchanan
- Burcu Yüksel Ripley
- Iwa Salami
The subgroup summarised its assessment of security considerations for the digital pound. They highlighted the importance of a clear governance framework covering data privacy, fraud prevention and cyber security, alongside well‑defined responsibilities between the Bank, Payment Interface Providers (PIPs) and External Service Interface Providers (ESIPs). The subgroup drew lessons from international examples, including work on offline and cross-border payments, noting their relevance to the UK design.
On privacy, the subgroup emphasised that strong safeguards are essential for public trust. They noted that privacy‑enhancing technologies could help ensure that the core ledger does not hold personal identifiers while still allowing intermediaries to meet AML/CFT obligations.
The subgroup also pointed to non-resident access and cross‑border use as areas requiring careful design, given varying data standards and regulatory expectations. Offline capability was seen as important for resilience and potentially supportive of privacy, with relevant lessons from other CBDC pilots. On cyber and quantum threats, the subgroup noted that low‑cost transactions broaden the attack surface and recommended exploring throttling or “cool‑off” measures, as well as planning a future pathway for post‑quantum cryptographic migration.
During the discussion, the Bank agreed with the framing of “privacy from whom?”, reaffirming that it would not see personal data and that strong regulation would be in place to manage data use by private intermediaries. The Bank confirmed that a centralised settlement ledger remains the current proposal, with other technologies being evaluated.
Item 3: Subgroup discussion – Innovation
Is the digital pound likely to meet the core objective of promoting payments innovation?
Members:
- Jonathan Michie
- Michael Cusumano
- Pinar Ozcan
- Danae Stanton Fraser
The subgroup presented its analysis drawing on academic research and international case studies, including China, India, Kenya and Brazil. The work assessed how a digital pound could support innovation through both financial inclusion and improved payment system efficiency.
On financial inclusion, the subgroup noted that, unlike many emerging markets where CBDCs aim to provide “digital cash” to the unbanked, the UK’s unbanked population is small. However, they stressed that design choices, such as accessible interfaces, low‑cost options for small merchants, and safeguards for users with lower digital literacy, would influence inclusion across the broader population. They emphasised that with user‑centred design and careful data‑sharing rules, a digital pound could address some existing inequalities.
Turning to efficiency and innovation, the subgroup found that CBDCs may enhance transparency and support cross‑border efficiency when combined with upgraded infrastructure, but gains depend on interoperability, operational resilience and international coordination. They noted evidence from pilots abroad, including insights on offline capability and the importance of open infrastructure.
International experience shows adoption is likely to be relatively slow, at least initially. The subgroup highlighted that even with public sector support, uptake of new public digital payment systems abroad has been gradual. They concluded that achieving critical mass in the UK may require targeted incentives and careful sequencing, and that the Bank should consider the appropriate role of remuneration, merchant incentives and public‑sector use to seed adoption.
During discussion the Bank agreed that a platform-based model is central to enabling innovation, with the digital pound acting as shared infrastructure rather than a single product. The Bank agreed further work may be warranted to assess the long-term opportunities from offline functionality and cross-border interlinking.
Item 4: Bank presentation – Holding limits for systemic stablecoins and a potential digital pound
Before turning to discuss the financial and monetary stability sub-group, as background the Bank presented its analysis of the role of holding limits for sterling‑denominated systemic stablecoins and a potential digital pound. The work explored how limits could mitigate risks during periods of financial stress, including large‑scale flows from deposits into new forms of digital money.
Members discussed the assumptions behind the Bank’s severe illustrative stress scenario, including the implied scale of adoption and how the shocks compared to previous examples of deposit runs. The Bank clarified that the severe illustrative stress scenario is intended to set out dynamics of interest and potential orders of magnitude under a hypothetical tail event, rather than act as a forecast.. The model assumes a distribution of impacts across individual banks and incorporates the role of central bank lending supported by pre‑positioned collateral, while recognising potential frictions.
Members emphasised that specific scenarios are useful but should not be the sole basis for policy design, noting that real‑world crises typically involve multiple overlapping shocks. The Bank confirmed that policy-maker judgement would also be an element of the decision-making process.
The Bank’s provisional view is that holding limits for the digital pound in the £10–20k range are appropriate for launch, with scope for recalibration as adoption patterns and bank behaviours evolve. Limits would not be assumed permanent: they could be adjusted or withdrawn once the system has adapted and risks are better understood.
Item 5: Subgroup discussion – Financial & Monetary Stability
Is the digital pound consistent with the Bank’s statutory objectives?
Members:
- Andrew Levin
- Davide Romelli
- Sheri Markose
- Gbenga Ibikunle
The subgroup presented its assessment of how a digital pound could support financial and monetary stability, focusing on limits, remuneration, privacy and interoperability. They distinguished between two forms of disintermediation: gradual and rapid. Gradual shifts of deposits may enhance stability by reducing reliance on fragile institutions, but rapid shifts during stress could amplify instability if adoption and limits are high. The subgroup therefore recommended a balanced approach to limits and remuneration. This should be sufficient to enable meaningful adoption but calibrated to avoid destabilising flows. They noted international work suggesting that optimal limits may be lower than some proposed UK ranges, although acknowledged that this may reflect the different structures of these financial systems.
The subgroup assessed that remuneration is a key driver of adoption. If the digital pound offered interest comparable to deposits, large shifts into digital pound would be likely. Whereas if unremunerated, it may struggle to compete with potential interest-bearing stablecoins and tokenised deposits. They suggested tiered or state contingent remuneration may be a more flexible tool than static limits. The sub-group also noted that central bank balance sheet pressures in many jurisdictions could be a consideration influencing decisions around whether to launch a CBDC, given that an unremunerated currency could generate potentially significant backing asset income.
The subgroup presented modelling of UK adoption, indicating that uptake would be gradual even with significant initial seeding, and that network effects and incumbency advantage mean adoption would require careful design and targeted incentives. They emphasised that slow adoption poses fewer risks than fast disintermediation, but that high limits or remuneration could encourage rapid shifts.
In discussion, Members argued that remuneration is closely linked to broader developments in stablecoins and tokenised deposits and should not be treated in isolation. They suggested that tiered remuneration could offer the Bank more control over flows, while avoiding blunt constraints. The Bank recognised the argument but noted that remuneration is not part of the proposed digital pound design.
Item 6: Subgroup discussion – Uniformity & Alternatives
Is the digital pound likely to meet the core objective of money uniformity, and is it the best option?
Members:
- Alistair Milne
- David Skeie
- Dirk Niepelt
The subgroup presented its assessment of whether a digital pound is necessary to maintain money uniformity, defined as a stable 1:1 exchange rate between different forms of sterling‑denominated money. They felt that the key requirement for uniformity is wholesale‑level convertibility via central bank reserves, ensuring that bank liabilities (including deposits and tokenised deposits) can be redeemed at par into reserves and used for settlement in central bank money.
On that basis, retail CBDC is not strictly required to preserve uniformity, but may play a valuable supporting role, particularly as transactional use of cash declines. Retail access to public money can reinforce trust, provide a clear reference point for users, and help anchor expectations in periods of stress.
The subgroup emphasised that some types of stablecoins present greater risks to uniformity, particularly closed‑loop models without direct redemption rights for end users, where market prices can deviate from par in stress. In their view, large‑scale use of such instruments could fragment the monetary system unless accompanied by strong convertibility and settlement arrangements aligned with RTGS. They also highlighted the importance of distinguishing between programmable payments and programmable money, noting that the latter could introduce economically distinct “tiers” of money if not designed carefully. The Bank confirmed that programmable money is not in consideration for the digital pound design.
The Bank welcomed the subgroup’s analysis, agreeing that uniformity is now better understood as part of a broader question about public money in a multi-money ecosystem, rather than a narrow objective for CBDC alone.
Item 7: Subgroup discussion – Public & Private Financial Viability
Can the digital pound be financially viable for the public and private sectors?
Members:
- Anna Omarini
- Darren Duxbury
- Doh-Shin Jeon
- Marta Arroyabe
The subgroup presented its analysis of financial viability through three lenses: the evolving payments landscape, behavioural economics, and two-sided market dynamics between consumers and merchants. They noted that payment behaviours are shifting rapidly as transactional use of cash declines and digital platforms, biometrics and wallet-based ecosystems become more prominent. These changes introduce both competitive pressures and risks of fragmentation, reinforcing the strategic importance of monetary sovereignty.
The subgroup identified key drivers of consumer adoption: convenience and security; remuneration and incentives; trust and privacy; clear communication of the digital pound’s value proposition; and behavioural factors such as habits, mental accounting and digital literacy. For merchants, the main determinants of acceptance are lower net transaction costs, ease of integration and interoperability, and trust in reliability.
The subgroup framed adoption as a classic two-sided market challenge. Consumers adopt only if merchants accept, while merchants accept only if consumers are likely to use the digital pound. Interoperability can lower barriers, but network effects remain central. They noted that while public sector seeding can boost early adoption, international evidence shows this does not guarantee sustained usage. The subgroup did not reach a definitive conclusion on viability, arguing that commercial models must be explicitly designed for both consumers and merchants, and that UK-specific features, such as the dominance of debit cards and the small share of unbanked users, mean overseas lessons must be applied cautiously. They highlighted two areas requiring further work: merchant segmentation and the minimum scale required for a sustainable acceptance equilibrium.
The Bank welcomed the analysis, highlighting the subgroup’s distinction between adoption and usage. The Bank noted that intermediary viability is essential as providers must see clear business cases to act as PIPs or ESIPs.
Item 8: Closing reflections and next steps
The Chair closed the meeting by expressing appreciation for the quality and generosity of contributions throughout the time the group had met. He noted that the Bank would continue to engage with Members as subgroup analysis is finalised, and was pleased to see some of the work had contributed to Members’ academic publications. The Chair signalled that channels for ongoing dialogue remain open and thanked Members once again for their contributions.