After working on a pilot central bank digital currency (CBDC) project alongside the Bank of International Settlements (BIS) for a full year, the Bank of England (BOE) is edging closer to introducing its own digital currency, according to Bloomberg.
The project, titled Project Rosalind, aimed to explore the feasibility and potential benefits of CBDCs. According to a report published by BIS last week, CBDCs can facilitate faster and easier peer-to-peer payments, enable the creation of innovative financial products, and help combat fraud. Moreover, CBDCs could introduce “programmability” to money, allowing for automated settlements and verification processes.
These initial results bolster the case for BOE to launch its own CBDC, which has already been informally dubbed “Britcoin.” A final decision on whether to carry out a digital currency will depend on the feedback received through an ongoing consultation, which is set to conclude at the end of the month.
After Brexit, many banks have less interest being in London due to the lack of automatic access to EU markets. Being on the cutting edge with CBDCs could potentially ameliorate that, and help Britain continue its position as a hub for the next generation of financial systems.
The pursuit of a CBDC by the BOE has faced criticism, including from former BOE Governor Lord Mervyn King who called it a “solution without a problem.”
In the broader context, the progress made by the BOE in advancing its digital currency agenda reflects the growing trend of central banks worldwide exploring CBDCs. More countries are eyeing digital currencies and looking to “create the next reserve currency which could take over the U.S. dollar,” Gilbert Verdian, Chief Executive Officer and Founder of Quant told Bloomberg.
While CBDCs have been launched in other countries, they have encountered limited success due to various challenges, partly because—echoing King’s comment—people don’t know what to do with them. For example, Bloomberg notes, the Bahamas Sand Dollar faced technical issues, resulting in frequent offline periods, while Nigeria’s CBDC struggled to gain user adoption due to a lack of perceived benefits.