Today, Her Majesty’s Treasury and the Bank of England are launching a consultation on a central bank retail digital currency (CBDC), commonly known as the digital pound. That’s despite significant skepticism expressed during recent parliamentary hearings.

In terms of timeframes, after further technical investigations, a decision will be made around 2025 with a possible launch towards the end of this decade.

Since the UK has strong payment systems that allow people to make bank transfers in real time, the need for a BritCoin is less obvious. But Bank of England Governor Andrew Bailey hinted at the motivation.

“As the world around us and the way we pay for things becomes more digitized, the case for a digital pound in the future continues to grow. A digital pound would provide a new form of payment, help businesses, maintain trust in money and better protect financial stability,” Bailey said.

“However, there are a number of implications that our technical work will need to consider carefully. This consultation and the additional work to be done by the Bank will now form the basis of what would be a profound decision for the country on how we use the money.”

With increased digitization, the use of cash could decline, making the average person’s use of central bank money less widespread. Providing a digital pound not only enables private access, but supports interoperability between private currency and payment systems. For example, in the UK it is difficult to withdraw money from PayPal to the payment provider Wise.

“While cash is here to stay, a digital pound issued and backed by the Bank of England could be a reliable, accessible and easy-to-use new form of payment,” said Jeremy Hunt, Chancellor of the Exchequer.

“That’s why we want to investigate what’s possible first, while always making sure to protect financial stability.”

During a parliamentary hearing last month, Governor Bailey expressed the view that for private digital currencies, such as stablecoins, to be strong and trustworthy, they should be backed by money held at the central bank, so-called synthetic CBDCs. Doing so begins to blur the line between commercial and central bank money.

The Bank of England is already doing research, including a wallet project and developing an API to allow payment providers to connect to a CBDC system.

More to follow.