The Bank of England is gearing up to introduce a sandbox aimed at evaluating a potential central bank digital currency or a government-issued digital pound.

On January 14, the BoE released a progress report detailing possible applications for a CBDC, potential business models, and a roadmap for testing that emphasizes blockchain-based payment systems. Named the “Digital Pound Labs,” this initiative is scheduled to launch this year with the goal of promoting collaboration between governmental authorities and private sector financial entities.

The Bank of England highlighted the necessity of involving both local and international stakeholders to pinpoint issues within existing payment ecosystems that a digital pound or CBDC could potentially resolve.

To facilitate this, the BoE has decided to dissolve its Technology Forum, which previously acted as a feedback mechanism for public and institutional insights. The Digital Pound Lab will adopt a more “hands-on” strategy, partnering with the Academic Advisory Group and the Engagement Forum as part of the consultation framework established by the bank.

No decision made on UK CBDC

As indicated in the BoE’s report, authorities have not reached a conclusion about advancing a CBDC initiative, despite the formal introduction of the Digital Pound Lab. The bank and HM Treasury aim first to “develop a more comprehensive policy and technology framework” informed by the consultations conducted during the design phase. The BoE anticipates that this process could span several years.

Additionally, any digital pound would necessitate approval from the U.K. Parliament, followed by further public consultations prior to the introduction of primary legislation. Lawmakers had previously expressed caution regarding CBDCs in June 2023 after the central bank had hinted at a sovereign digital currency in February.

No determination has been made on whether to move forward with a digital pound. Upon concluding the design phase in the coming years, which will also consider advancements in the broader payments landscape, the Bank and Government will evaluate the policy justification for a digital pound and decide whether to progress.

BoE progress report