The Bank of England has decided to collaborate with MIT regarding the development of a CBDC. The Bank of England is the latest bank that has expressed interest in exploring the scope of a CBDC.
This latest partnership is with MIT’s Media Lab’s Digital Currency Initiative, through which BoE seeks to inspect and understand potential challenges, risks, and opportunities associated with developing a central bank digital currency. It would be a Twelve-month long research project as mentioned by the BoE.
The collaboration forms part of the Bank’s wider ‘research and exploration’ into CBDC and will be focused on exploration and experimentation of potential technology approaches. This work is focused on exploratory technology research and is not intended to develop an operational CBDC.
The Bank of England had initially started researching CBDCs in the year 2020. After, the bank decided to launch a discussion paper on the topic.
After receiving a positive response from DCI or MIT’s Media Lab’s Digital Currency Initiative, BOE continued the research with the help of an exploratory task force set up in 2021. The latest discussion paper was made public last week.
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The Ever-Growing Popularity Of CBDC
The BoE has mentioned in their statement that this collaboration isn’t intended to develop an operational CBDC. The bank, however, emphasizes the need to study them in case it contemplates releasing a digital currency in the future.
Other Central Banks all across the globe have also expanded their attempts at researching the developments of electronic money. Recently, the Bank Of Canada had also announced a partnership with MIT which could primarily focus on research.
The European Central Bank also began its investigation phase regarding the Digital Euro, the bank has also been studying the design along with distribution of the Digital Euro. African countries such as Kenya and Jamaica also have started to test their Central digital money. Bank of Korea also finished the first phase of CBDC testing.
BOE’s Plan Of Action
Digital currencies have become an integral part of financial inclusion given the ever-changing financial landscape. With Bitcoin, Ethereum and other cryptocurrencies gaining popularity with each passing day, centrally backed digital currencies could change the traditional financial system. Similarly, the BoE could be planning to launch a digital pound to keep up with other nations across the world.
The bank not only created a CBDC task force and an HM treasury (Her Majesty’s Treasury), it also had formed a Technology Engagement Forum (TEF). The TEF was responsible for proposing the two models that could possibly be used for the CBDCs.
The BoE has supposedly revealed that it aims to prioritize retail CBDCs and not wholesale digital currencies. This move is intended to benefit the private sector as they could come up with their own electronic currency, as compared to wholesale CBDCs. The BoE has clearly highlighted that it hasn’t come up with any decision yet that points towards introducing a digital currency in the UK.
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