The BoE’s decision to enter the race comes as other central banks, like the ECB and the People’s Bank of China, plow ahead with their own plans for public digital currencies.
A joint consultation, which runs until June 7, paves the way for more detailed work on the exact design and puts the BoE on a similar trajectory to the ECB — which is considering bringing forward a digital euro.
But there are big questions over the use case for these digital banknotes, and how they would work in practice.
The House of Lords described the project last year as a “solution looking for a problem” and some BoE officials, like Andrew Hauser, have previously voiced concerns about the implications for monetary policy.
“A narrow digital currency that largely cannibalized banknote demand, for example, might have little or no impact. By contrast, a broad digital currency with many attractive payments features could materially increase the demand for central bank liabilities,” Hauser said in June last year.
Huw Van Steenis, who advised former BoE governor Mark Carney on his Future of Finance review in 2018, told POLITICO there were still more questions than answers related to the viability of a digital pound.
“Money is too important to be left [just] to central bankers as the big decisions are political and economic, not just technical,” he said, adding that most early pilots, such as those undertaken by the Nigerian and Bahamian central banks, and even that of China itself, were struggling to gain adoption.