Bank of England advances design phase of ‘digital pound’ CBDC

The Bank of England (BoE) and HM Treasury reported significant progress in the design phase of the digital pound, a proposed central bank digital currency (CBDC) that would complement traditional banknotes and enhance the UK’s payment infrastructure.

The update highlighted efforts to align the initiative with the nation’s evolving payments landscape and broader economic goals. The digital pound, if implemented, would serve as a public platform fostering private-sector innovation while maintaining the accessibility and trust associated with central bank-issued money.

It would also guarantee user privacy through legal safeguards, ensuring that neither the central bank nor the government could access personal data or influence spending decisions. However, the introduction of the digital pound would require parliamentary approval and public consultation.

Progress and Goals

The BoE emphasized four key outcomes for the retail payments ecosystem — ensuring the singleness of money, driving innovation, strengthening infrastructure resilience, and establishing effective governance frameworks.

The National Payments Vision, a government initiative, illustrates the importance of these objectives in building a competitive and inclusive payments landscape. A central feature of the design phase is the exploration of a public-private platform, which would allow private firms to develop user-friendly payment services atop the central bank’s resilient core infrastructure.

Officials believe this model could counter risks like “ walled gardens, ” where proprietary systems restrict consumer options and market interoperability.

The digital pound blueprint, currently in development, will address technological, regulatory, and operational considerations, serving as a foundation for evaluating its costs and benefits. The central bank is simultaneously engaging with stakeholders, including businesses, academics, and fintech firms, to shape its approach.

This design phase will culminate in an assessment of the policy case for a digital pound, examining its alignment with monetary stability, safety, and financial inclusion goals. Findings from the assessment, expected within the next few years, will guide the decision on whether to proceed to the build phase.

Digital Pound Lab

Through the newly established “Digital Pound Lab,” the Bank has conducted experiments to assess the feasibility of various design options. These include testing application programming interfaces (APIs), exploring offline transaction capabilities, and enhancing point-of-sale integration.

Collaborations with private sector firms have also helped identify potential use cases and refine technical requirements. Notable experiments include Project Rosalind, a partnership with the Bank for International Settlements that demonstrated the potential of standardized APIs to spur innovation.

Privacy-enhancing technologies, token-based payment systems, and e-commerce integrations have also been explored, highlighting the digital pound’s potential to meet diverse user needs.

While no final decision has been made regarding the implementation of a CBDC, the central bank’s efforts aim to position the UK at the forefront of payment innovation.