The country is expected to take a leading role in the use of digital currencies.
The UK Treasury is working with the Bank of England to explore the possibility of creating a national central reserve for digital currencies.
Economic Secretary to the Treasury John Glen said the government is confident the country will “take a leading role in exploring central bank digital currencies and the wide-ranging opportunities and challenges they could bring.”
In line with this year’s budget, the Bank of England published a paper on the subject and invited public feedback.
That consultation has now closed, and the central bank will begin discussions with the government to assess whether to proceed with the idea of implementing a digital currency reserve and how that might be achieved.
Responding to a written question from Conservative MP Mark Pritchard, Glen revealed that “His Majesty’s Treasury and the Bank of England are now working together to consider the next steps.”
The UK government is the latest to join a growing number of countries considering investment in the development of a central bank digital currency (CBDC). Other nations examining their own CBDCs include Sweden, Canada, South Korea, the United States, and China.
While a US digital dollar is estimated to take another five years to develop, China’s digital yuan is already undergoing pilot rollouts in four cities.
The Bank for International Settlements (BIS), an international financial institution owned by member central banks, recently expressed strong support for CBDCs in a new report. The BIS, collectively owned by 62 central banks, believes CBDCs could trigger a “sea change,” offering households and businesses worldwide new, secure, and efficient payment options.
The BIS argues that, beyond helping central banks advance financial inclusion, improved payment methods, and greater innovation, CBDCs could also provide an alternative to costly remittance channels. In regions with fewer channels — such as parts of Africa — remittance fees often range from five to ten percent. By making transactions faster, more transparent, and more efficient, CBDCs could reduce the fees that migrant workers in developing countries pay to send money home.
The BIS cautions that issuing CBDCs should be approached carefully, noting that “this is not so much a reaction to cryptocurrencies and private-sector ‘stablecoin’ proposals, but rather a focused technological effort by central banks to pursue multiple public policy objectives at once.”