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Bank of England and HMT news – creation of a CBDC Taskforce and related forums

Bank of England and HMT news – creation of a CBDC Taskforce and related forums

Background

  • On 19 April 2021, the Bank of England (Bank) and HM Treasury (HMT) announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to co-ordinate the exploration of a potential UK CBDC
  • A CBDC would be a new form of digital money issued by the Bank of England and for use by households and businesses, existing alongside cash and bank deposits rather than replacing them
  • The UK Government and the Bank of England have not yet decided on whether to introduce a CBDC in the UK, and will engage widely with stakeholders on the benefits, risks and practicalities of doing so
  • The Bank had previously issued a Discussion Paper for this topic in March 2020: “Central Bank Digital Currency: opportunities, challenges and design
  • The creation of this Taskforce and likely digital currency outcomes are important for all organisations within UK financial services

Impacts

The Taskforce will be co-chaired by the Bank’s Deputy Governor for Financial Stability and HM Treasury’s Director General of Financial Services with planned future involvement when needed by other UK authorities.

The Bank also announced the creation of a CBDC Engagement Forum and a CBDC Technology Forum as well as a new Bank division known as the CBDC Unit.  These will be used to gather industry inputs across many non-technology and technology aspects.

Central banking digital currencies (CBDCs) may have significant implications for banks and non-bank firms, forcing them to adopt new approaches to processing payments and creating new business possibilities.

CBDCs will create a new range of banking service opportunities, requiring changes in national and international banking and payment rules.

Opportunities and challenges for banks seem likely to include new infrastructure requirements for which each country’s central bank and firms will need to co-operate in design and development, risk assessment and mitigation, costs and implementation.

For example, technological capabilities will need to connect existing large-value payment systems and transaction networks to new CBDC reserves as well as creating comprehensive fully-compliant electronic CBDC vaults and wallets for use by the bank’s clients.

Timeline with relevant dates to be logged on regulatory calendar

  • Assess progress so far of CBDC Taskforce by 31 December 2021

Next steps

All financial services firms should actively monitor this broad topic, related actions and discussions to consider possible impacts for existing and future business activities.

If anyone has specific questions or needs any advice, contact our specialists.