The Bank of England has chosen to partner with the Massachusetts Institute of Technology on the construction of a CBDC. The Bank of England is the latest bank to indicate an interest in studying the potential scope of a CBDC.
This newest collaboration is with MIT’s Media Lab’s Digital Currency Initiative, which aims to examine and understand the problems, dangers, and possibilities inherent in building a central bank digital currency. As announced by the BoE, it would be a twelve-month study project.
The partnership is part of the Bank’s broader’research and investigation’ into CBDC and will concentrate on the study and testing of possible technological options. This effort is experimental in nature and is not intended to result in the development of a functional CBDC.
Initially, the Bank of England began exploring CBDCs around the year 2020. Following that, the bank decided to publish a discussion paper on the subject.
Following a favourable reaction from DCI or the MIT Media Lab’s Digital Currency Initiative, BOE resumed the investigation in 2021 with the assistance of an exploratory task group. The most recent discussion paper was released last week.
The BoE said in their statement that this partnership is not intended to result in the establishment of a functional CBDC. However, the bank underscores the need of studying them in case it decides to issue a digital currency in the future.
Other Central Banks throughout the world have also increased their efforts to explore electronic money’s development. Recently, the Bank of Canada announced another cooperation with MIT, this time focusing on research.
The European Central Bank has also begun its research phase into the Digital Euro; the bank has been investigating the Digital Euro’s architecture and dissemination. African nations like as Kenya and Jamaica have also begun testing their own digital currency. Additionally, the Bank of Korea completed the first phase of CBDC testing.
BOE’s Action Plan
Given the ever-changing financial environment, digital currencies have become a vital aspect of financial inclusion. With Bitcoin, Ethereum, and other cryptocurrencies gaining popularity daily, centrally backed digital currencies have the potential to disrupt the established financial system. Similarly, the BoE may be considering launching a digital pound to maintain pace with other countries.
Not only had the bank established a CBDC task force and an HM treasury (Her Majesty’s Treasury), but it had also established a Technology Engagement Forum (TEF). The TEF was responsible for suggesting the two possible models for CBDCs.
According to reports, the BoE intends to emphasise retail CBDCs above wholesale digital currencies. This change is meant to assist the private sector, since it allows them to develop their own electronic currency rather than relying on wholesale CBDCs. The BoE has made it very plain that it has made no decision yet that would indicate the introduction of a digital currency in the UK.
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