Bank of England reconsiders Digital Pound…"CBDC necessity has decreased"

Doohyun Hwang

Summary

The Bank of England announced that it is reconsidering the introduction of the Digital Pound, stating that the practical benefits have decreased.
The Bank of England said it will continue preparations for CBDC issuance, but may step back if private electronic payment technologies develop sufficiently.
Globally, enthusiasm for CBDCs has cooled, and the Bank of England said internal consensus is growing that the necessity for adoption has diminished.

The Bank of England is reconsidering its plans to introduce a central bank digital currency (CBDC), the 'Digital Pound.' Recently, internal analyses have suggested that the practical benefits of CBDC adoption have diminished, signaling a shift in policy towards private sector-led payment innovation.

On the 21st (local time), Bloomberg, citing multiple sources, reported, "The Bank of England is currently holding informal talks with banks, encouraging the development of electronic payment technologies that can offer similar functions even without issuing a Digital Pound," and clarified, "While preparations for issuing a CBDC will continue, the Bank holds the position that it may step back if private sector innovation advances sufficiently."

Only a few years ago, the Bank of England stated that introducing the Digital Pound was "highly likely." The Digital Pound project is currently in its design phase, and after this phase is completed, the Treasury and the Bank plan to decide together whether to proceed.

Andrew Bailey, Governor of the Bank of England, also reportedly expressed skepticism about the Digital Pound in a recent meeting and stated the need to expand Tokenized Deposits.

Globally, enthusiasm for CBDCs has also waned. The United States, under the Trump Administration, declared a halt to CBDC development citing financial stability, and the Bank of Korea also temporarily suspended its digital won pilot program 'Hangang' last month. In contrast, the European Central Bank (ECB) remains committed to accelerating the digital euro initiative.

Within the Bank of England, there is a growing sentiment that the anticipated benefits are not what they once were. A report published at the end of last year noted, "As online payment technologies have advanced, the necessity of introducing a CBDC has greatly diminished." Recently, Sarah Breeden, Deputy Governor of the Bank of England, and Gwyneth Nurse, Director General of Financial Services at the Treasury, reportedly stepped down as co-chairs of the public-private consultative body 'CBDC Forum.'