Central bank digital currencies

The Bank provides physical money in the form of banknotes, which can be used by households and businesses to make payments. We also provide electronic money, but this can only be used by banks and selected financial institutions. A Central Bank Digital Currency would make electronic money, issued by the Bank of England, available to all households and businesses. This would allow everyone to make electronic payments in central bank money. 

If a CBDC were to be introduced, it would be denominated in pounds sterling, just like banknotes, so £10 of CBDC would always be worth the same as a £10 note. CBDC is sometimes thought of as equivalent to a digital banknote, although in some respects it may have as much in common with a bank deposit. Any CBDC would be introduced alongside – rather than replacing – cash and bank deposits. 

We have not yet made a decision on whether to introduce CBDC. In March 2020 we published our Discussion Paper on CBDC, which outlines one possible approach to the design of CBDC and asks for feedback from the payments industry, academics, and other interested parties. 

CBDC could create new opportunities for payments and the way the Bank keeps prices and the whole UK financial system stable. But it could also create challenges, which we would need to manage very carefully. So we are actively researching CBDC and drawing on expertise from across and outside of the Bank. Our 2020 CBDC Discussion Paper outlines our key areas of research, and our summary of responses to the Discussion Paper outlines the feedback we received.

Recognising that the way we make payments and use money is changing rapidly, we have also published a Discussion Paper on new forms of digital money, which aims to broaden the debate and seek views on the Bank’s emerging thoughts on the subject.

• 2020 CBDC Discussion Paper
• Summary of responses to the 2020 Discussion Paper
• Discussion Paper on new forms of digital money

The Bank of England and HM Treasury have created a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential UK CBDC. Information about the Taskforce can be found below. The Bank has also established two external engagement groups. The CBDC Engagement Forum, chaired jointly with HM Treasury, will engage senior stakeholders and gather strategic input on all non-technology aspects of CBDC. The CBDC Technology Forum will engage stakeholders and gather input on all technology aspects of CBDC from a diverse cross-section of expertise and perspectives. The Terms of Reference of each Forum and information on how to apply to become a member can also be found below.

To contact the team, please email cbdc@bankofengland.co.uk.

Watch the CBDC webinar, from July 2021 following the publication of the summary of responses to the 2020 Discussion Paper.

Watch our previous webinar, from April 2020, following the publication of the 2020 Discussion Paper on CBDC.

Central Bank Digital Currency Taskforce

HM Treasury and the Bank have established the CBDC Taskforce to coordinate the exploration of a potential UK CBDC. The purpose of the Taskforce is to ensure a strategic approach to, and to promote close coordination between, the UK authorities as they explore CBDC. The Government and the Bank have not yet made a decision on whether to introduce a CBDC in the UK. 

Terms of reference

CBDC Engagement Forum and CBDC Technology Forum

The Bank has established two external engagement groups. The CBDC Engagement Forum, chaired jointly with HM Treasury, will engage senior stakeholders and gather strategic input on all non-technology aspects of CBDC. The CBDC Technology Forum will engage stakeholders and gather input on all technology aspects of CBDC from a diverse cross-section of expertise and perspectives.  

CBDC Engagement Forum

The CBDC Engagement Forum, chaired jointly with HM Treasury, will engage senior stakeholders and gather strategic input on all non-technology aspects of CBDC. The Engagement Forum will have an important role in helping the Bank and HM Treasury understand the practical challenges of designing, implementing and operating a CBDC. It will consider issues such as – but not limited to – ‘use cases’ for CBDC, functional needs of CBDC users, roles of public and private sectors in a CBDC system, financial & digital inclusion considerations, and data & privacy implications. Members will be drawn from financial institutions, civil society groups, merchants, business users and consumers through open application – the application window has now closed.

Engagement Forum terms of reference

CBDC Technology Forum

The CBDC Technology Forum will engage stakeholders and gather input on all technology aspects of CBDC from a diverse cross-section of expertise and perspectives. The Forum will have an important role in helping the Bank to understand the technological challenges of designing, implementing and operating a CBDC. Members will be invited by the Bank and drawn from a range of financial institutions, academia, fintechs, infrastructure providers and technology firms through open application – the application window has now closed.

Technology Forum terms of reference

CBDC versus cryptocurrency

A CBDC would be fundamentally different to cryptocurrencies or cryptoassets. 

Cryptoassets combine new payments systems with new currencies that are not issued by a central bank. Examples of privately issued digital currencies include Bitcoin, Ether (Ethereum) and XRP. We have written about the economics of digital currencies and innovations in payment systems and the emergence of digital currencies.

Our Financial Policy Committee has assessed cryptoassets and concluded that they do not currently pose a risk to monetary or financial stability in the UK. However, cryptoassets do pose risks to investors and anyone buying cryptoassets should be prepared to lose all their money. 

In January 2021, HMT published its ‘UK regulatory approach to cryptoassets and stablecoins: consultation and call for evidence’. The consultation closed on 21 March 2021.

HMT’s consultation set out objectives for a UK regime for crypto-assets. These included: protecting financial stability; ensuring consumer protections; and promoting competition and innovation. The consultation outlined HMT’s proposed approach for an overarching framework to bring crypto-assets into the scope of activities that are regulated – the ‘regulatory perimeter’.

Our Fintech Hub monitors wider developments in distributed ledger technology.