The Treasury and the Bank of England is to launch a consultation next year on potential plans to launch a UK central bank digital currency (CBDC).

The central bank digital currency would be a new form of digital money issued by the Bank of England and for use by households and businesses for their everyday payments needs. It would exist alongside cash and bank deposits, rather than replacing them.

In 2022, the Treasury and the Bank will launch a consultation which will set out their assessment of the case for a UK central bank digital currency, including the merits of further work to develop an operational and technology model for the digital currency. It will evaluate the main issues at hand, consider the high level design features, possible benefits and implications for users and businesses, and considerations for further work.

This consultation will form part of a ‘research and exploration’ phase and helps to inform policy development over the next few years.

No decision has been made on whether to introduce a central bank digital currency in the UK, which would be a major national infrastructure project. In April 2021, the Bank and the Treasury initiated the joint CBDC Taskforce to coordinate the exploratory exercise. The Bank also set up the engagement and technology forums, where relevant stakeholders from industry, civil society and academia provide strategic and technical input to the work.

The 2022 consultation will inform a decision on whether the authorities are content to move into a ‘development’ phase which will span several years. A technical specification would follow the consultation explaining the proposed conceptual architecture for any central bank digital currency. This could involve in-depth testing of the optimal design for, and a feasibility study.

If the results of this development phase conclude that the case for a central bank digital currency is made, and that it is operationally and technologically robust, then the earliest date for launch would be in the second half of the decade.

Economic secretary to the Treasury, John Glen, said: ‘This consultation will begin an open discussion on the role a UK central bank digital currency might play in the UK.

‘I’d encourage everyone to contribute to the discussion so we can explore the opportunities this could bring, as well as understanding any risks it may pose.’

Deputy governor for financial stability at the Bank of England, Jon Cunliffe, said: ‘The plan to publish a consultation next year on CBDC is a crucial step in our policy development, especially as we further our thinking on the pressing issues at hand.

‘What it will do is provide a platform for interested parties and relevant groups to engage with the key questions on the merits of CBDC, and whether the public sector should advance to a development phase.’