Central Bank of England seeks public input for trial phases of retail CBDC implementation
Bank of England Advances Trials for Wholesale Central Bank Digital Currency and Synchronization Solutions
The Bank of England (BoE) is pushing forward with trials for wholesale central bank digital currency (wCBDC) and synchronization solutions, as part of its mission to modernize the UK's financial infrastructure.
In a recent discussion paper on innovation in money and payments, the BoE has outlined its objectives and ongoing activity. The trials, which focus on applying digital technology to payment systems, aim to improve efficiency, security, and real-time settlement in wholesale transactions.
The BoE's Governor, Andrew Bailey, has expressed some skepticism regarding a retail CBDC but sees the potential for digital innovation in commercial bank money and wholesale contexts. This indicates that the BoE's emphasis is on wholesale CBDC use cases and synchronization technologies to support the interbank and financial infrastructure.
The planned trials will include a wCBDC and a synchronization solution, enabling DLT transactions to settle using the real-time gross settlement (RTGS) system. The tests will cover a wide range of use cases, including delivery versus payment (DvP) and settlement of primary bond issuance transactions, as well as secondary market transactions.
Interoperability with global initiatives such as the BIS Project Agora for cross-border payments is also a key part of the tests. The synchronization solution is envisioned as a third system that integrates between the RTGS and various DLTs.
The BoE is currently running Project Meridian, which enabled a digital real estate transaction to settle via connectivity with the RTGS. Project Meridian FX is being run in conjunction with the European Central Bank.
The BoE has also asked for feedback on the sort of wholesale infrastructure needed to support tokenized deposits, as it tests this functionality through the Regulated Liability Network initiative. A digital securities transaction in which an end user makes a tokenized deposit payment will also be trialed.
The BoE is aware of the risks posed by stablecoins in the wholesale market and has stated that these risks are an order of magnitude greater than the risks posed by retail use cases. The bank is actively supporting pilot projects and collaborative research aligned with similar international central bank programs.
The BoE's planned timeline is currently centered on ongoing trials and experimentation through 2025. The bank has not yet committed to a launch date for a wholesale CBDC but is actively gathering feedback and assessing operational feasibility, technological solutions, regulatory implications, and market readiness.
In his preface, Governor Bailey emphasized the need for policymakers to accept that their assessments may become outdated due to the speed of change and innovation. The BoE's work reflects this recognition, as it continues to explore the potential of wCBDC and synchronization solutions to support the UK's financial system resilience and innovation.
- The Bank of England (BoE) is examining the potential of blockchain technology in its trials for wholesale central bank digital currency (wCBDC) and synchronization solutions, aiming to enhance security and real-time settlement in wholesale transactions.
- The BoE's focus on wholesale CBDC use cases includes testing tokenized deposits and digital securities transactions, soliciting feedback on the required wholesale infrastructure to support such functionalities.
- While the BoE's Governor, Andrew Bailey, has expressed some reservations about retail CBDC, he sees the value in digital innovation in commercial bank money and wholesale contexts.
- The BoE's exploration of wCBDC and synchronization solutions extends to collaborative research and pilot projects, with an active support for initiatives that align with similar international central bank programs, including the BIS Project Agora for cross-border payments.
