The Bank of England is considering dropping the digital pound project, following stalled efforts in the US and South Korea.
The Bank of England (BOE) took a complete 360 on its earlier stance on the debut of a digital dollar, raising fresh doubts about the future of central bank digital currencies (CBDCs) in the UK.
According to a recent Bloomberg report, officials are now leaning toward shelving the consumer-facing version of the digital pound, citing diminished benefits and a shift in priorities toward alternative payment innovations.
BOE Is Encouraging Banks to Use Alternatives
Sources familiar with the matter told Bloomberg that the BOE has been privately encouraging banks to prioritize innovations in electronic payments and tokenized deposits, solutions that could replicate many of the advantages of a CBDC without the need to launch one.
While the bank still wants to retain the capability to issue a CBDC in the future, its current stance suggests a growing willingness to abandon the retail digital pound project if private-sector innovation continues to progress.
A Shift in Tone
This is a substantial departure from the BOE’s tone just a few years ago, when officials, including the UK Treasury asserted that a digital pound was “likely” to be necessary.
BOE Governor Andrew Bailey has since expressed public skepticism, stating in June that he remains unconvinced of the need to “create new forms of money.”
Instead, Bailey has shifted his focus to tokenized bank deposits as a more practical and stable bridge between traditional finance and the digital asset space.
CBDC Push Losing Steam Globally
In the US, President Donald Trump’s administration has put its own CBDC project on hold, citing risks to financial stability. South Korea has also dialed back its digital currency pilot.
Even in the Eurozone, ECB officials have raised concerns about US policies that could disrupt dollar liquidity, further complicating the CBDC narrative.
Dependence on the US Dollar
The BOE is simultaneously taking steps to reduce the country’s dependence on the US dollar, recently asking UK banks to assess their ability to withstand a US dollar shock.
Early stress tests reportedly revealed that banks could not survive a dollar liquidity squeeze for more than a few days, underscoring the systemic reliance on the greenback.
Nearly 90% of global currency derivative contracts are denominated in dollars. Yet, even as the UK contemplates weaning off the dollar, the decision to potentially abandon the digital pound suggests crucial alarms surrounding the project.
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